Solid Nov Jobs Report = Dec Fed Rate Hike

The government said that the U.S. economy added 211,000 jobs in November, which was the high-end of the predicted range of 160,000-220,000. There is now little doubt that the Federal Reserve will raise short-term interest rates when it meets in a week and a half.

The three-month average of job creation stands at a solid 218,000 and year-over-year, 2.64 million jobs were created. Although 2015 average monthly job creation of 210,000 is less than last year’s strong pace of 260,000, it has certainly been strong enough to push down the unemployment rate from 5.8 percent a year ago, to a seven-year low of 5 percent. The broader measure of unemployment, which includes those who have stopped looking as well as those working part-time for economic reasons, edged up slightly to 9.9 percent, though remained under the key 10 percent level for a second consecutive month.

 The Fed is also likely to be encouraged by the breadth of job gains, including the domestic-focused construction, retail and health care sectors. That said, two areas that continue to be under pressure are mining and manufacturing, both of which have been struggling under the triple whammy of lower oil prices, weak demand overseas and a stronger U.S. dollar. Another area of weakness is the still low level of working-age Americans who have jobs or are actively looking for work. The participation rate edged up to 62.5 percent, due to a 273,000 increase in the labor force, but because of demographics and the large number of would-be workers giving up their job searches, participation remains near 40-year lows.

Back to the good news...after a swift 2.5 percent annual increase in October, wages in November were up a still-respectable 2.3 percent from a year ago. In a separate report released by the government earlier this week, Q3 hourly compensation jumped by 4 percent in the third quarter, on an annualized basis and was up 3.6 percent compared to the same quarter a year ago. If that trend holds, hourly compensation is on track to rise by the largest amount since 2007 and when adjusted for inflation, the increase would be the fastest since 2000. 

Overall, the results confirm that the economy continues to expand; the labor market is improving and workers are gaining leverage; and the Fed will soon hike interest rates for the first time in over nine years.