US employers hired more workers than expected in November and the jobless rate fell to a five-year low of 7.0 percent, heightening expectations the Federal Reserve will soon start ratcheting back its bond-buying stimulus.
Nonfarm payrolls increased by 203,000 new jobs last month, the Labor Department said on Friday.
The unemployment rate dropped three tenths of a percentage point to its lowest level since November 2008 as some federal employees who were counted as jobless in October returned to work after a 16-day partial shutdown of the government.
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Economists polled by Reuters had forecast payrolls rising only 180,000 last month and the unemployment rate falling to 7.2 percent from 7.3 percent.
Job gains for September and October were revised to show 8,000 more jobs created than previously reported, lending more strength to the report. Other details were also upbeat, with employment gains across the board, average hourly earnings rising and the workweek lengthening.
In addition, the jobless rate fell even as the participation rate - the share of working-age Americans who either have a job or are looking for one - bounced back from a 35-1/2-year low touched in October.
"The U.S. labor market is still far from healed, but it certainly is moving in the right direction," said Eric Stein, co-director of the Global Income Group at Eaton Vance Investment Managers in Boston.
U.S. stocks bounced higher at the open, the dollar rose against the euro and the yen, and U.S. benchmark Treasury yields hit a three-month high as traders increased bets the Fed could reduce its bond purchases as early as its next meeting on December 17-18.
The central bank has been buying $85 billion in Treasury and mortgage-backed bonds each month to hold long-term borrowing costs down in a bid to spur a stronger economic recovery.
Despite the jobs data, many economists said the central bank was still likely to hold off reducing its purchases until January or March to ensure the economy was on solid ground.
"This number puts a December taper on the table, but it isn't a certainty," said Stein.
Mixed economic data
Economic data so far for the fourth quarter have been mixed, with labor market and consumer spending indicators firming. However, the housing market and business spending have slowed.
Economists believe the Fed will probably not want to pull back on its stimulus before lawmakers on Capitol Hill strike a deal to fund the government. That could come as soon as next week, however. Congressional aides have said negotiators were down to the final details as they tried to close in on a deal.
A separate report from the Commerce Department showed consumer prices were steady in October, after having risen by 0.1 percent for three straight months. Over the past 12 months, prices rose 0.7 percent, the smallest gain since October 2009.
Excluding food and energy, prices were up just 0.1 percent for a fourth straight month. These so-called core prices were up only 1.1 percent from a year ago.
Both inflation measures remained well below the Fed's 2 percent target, and some economists said they provided another reason for the central bank to move cautiously in pulling back its stimulus.
"I don't think the Fed is in a big rush to do anything drastic in the absence of inflation," said Michael Marrale, a managing director at ITG in New York. "A few strong jobs numbers does not mean we are out of the woods."
Job gains in November were broad-based. Private-sector payrolls rose 196,000. But government employment also increased as hiring by state and local governments offset a decline in federal employment.
Manufacturing payrolls moved up 27,000, rising for a fourth straight month. Construction employment advanced 17,000, adding to October's gains even as the housing recovery has slowed.
Retail employment slowed, adding 22,300 last month compared to 45,800 in October. A late Thanksgiving holiday could have resulted in some of the seasonal hiring not being captured in November's report.
Leisure and hospitality, as well as professional and business services payrolls showed gains, but at a slower pace than in October.
The report also showed average hourly earnings rose by four cents last month, while the length of the workweek edged up to an average of 34.5 hours from 34.4 hours - both bullish signs for the economy.