U.S. private employers boosted hiring in November, signaling job growth is likely strong enough to support the first Federal Reserve interest rate hike in nearly a decade when policymakers meet later this month.
The ADP National Employment Report showed private payrolls increased 217,000 last month on top of the upwardly revised 196,000 jobs added in October. The strong jobs gains suggest solid underlying momentum in the economy despite a struggling manufacturing sector.
“The current pace of job creation is twice that needed to absorb growth in the working age population,” Mark Zandi, chief economist at Moody’s Analytics, said in a statement. “The economy is fast approaching full employment and will be there no later than next summer.”
The ADP report, which is jointly developed with Moody’s Analytics, was released ahead of the Labor Department’s more comprehensive employment report on Friday.
According to a Reuters survey of economists, nonfarm payrolls increased 200,000 in November. While that would be a step-down from October’s robust 271,000 job gain, it would still be well above the amount needed to keep up with population growth.
The Federal Reserve has signaled its intention to lift its benchmark overnight interest rate from near zero at its Dec. 15-16 meeting. The U.S. central bank last raised interest rates in June 2006.
Economists surveyed by Reuters had forecast private payrolls rising 190,000 last month after October’s previously reported 182,000 increase.
The dollar rose to session highs against the yen and the euro after that data. Prices for U.S. government bonds fell.
In a separate report, the Labor Department said nonfarm productivity grew at a faster pace than previously thought in the third quarter. The trend, however, remained very weak.
Productivity, which measures hourly output per worker, increased at a 2.2% annual rate and not the 1.6% pace it had reported last month. Productivity expanded at a 3.5% rate in the second quarter.
The revision to third-quarter productivity was in line with economists’ expectations and reflected upward adjustments to the third-quarter gross domestic product estimate published last week. The economy grew at a 2.1% rate in the July-September period.
Productivity increased only 0.6% compared to the third quarter of 2014, underscoring the weakness in the trend. While that was marginally up from the 0.4% reported in November, it was the slowest rise in nearly a year.
Economists blame softer productivity on lack of investment, which they say has led to an unprecedented decline in capital intensity. While weak productivity has boosted employment growth as companies hired more workers to increase output, economists say it has contributed to stagnant wages and lowered the economy’s speed limit.
Economists say persistently tepid productivity could continue to limit wage growth even as the labor market approaches full employment.
In the third quarter, hours worked fell at a 0.3% rate, rather than the 0.5% decline reported in November. It was still the first drop since the third quarter of 2009 and reflected a decline in self-employment.
Unit labor costs, the price of labor per single unit of output, increased at a 1.8% rate in the third quarter, instead of the previously reported 1.4% pace. Unit labor costs rose at a 2.0% rate in the second quarter.
They were up 3.0% compared to the third quarter of 2014. Compensation per hour rose at a 4.0% rate in the third quarter, revised up from the 3.0% pace reported last month. Compensation was up 3.6% compared to the third quarter of 2014.