The U.S. economy added more new jobs than expected last month, the Labor Department said Friday, as wages jumped surprisingly higher in a move that could potentially stoke inflation and test the Federal Reserve's transition toward smaller near-term rate hikes.
The Bureau for Labor Statistics said 263,000 new jobs were created last month, well ahead of the Street consensus forecast of 200,000. Private payrolls were up 221,000, the BLS said, as the unemployment rate held at 3.7%. The BLS also revised its October jobs addition estimate to 284,000 from its original estimate of 261,000.
The BLS noted that hourly wages were up 0.6%, the biggest monthly gain since last year and topping Street forecasts of a 0.4% gain. On a year-on-year basis, wages were up 5.1%, the BLS said.
Federal Reserve Chairman Jerome Powell said earlier this week that the job market "holds the key to understanding inflation", citing data that suggests as many as 10.3 million positions remain unfilled as of the end of October.
"In the labor market, demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with 2 percent inflation over time," Powell told the Brookings Institution. "Thus, another condition we are looking for is the restoration of balance between supply and demand in the labor market."
U.S. stocks extended earlier declines following the data release, with the Dow Jones Industrial Average falling 211 points in the opening hour of trading while the S&P 500 gave back 28 points from last night's close. The The tech-focused Nasdaq was down 92 points.
Benchmark 10-year Treasury note yields were around 6 basis points higher at 3.587% while 2-year notes jumped to 4.351%. The CME Group's FedWatch suggests a 74% chance of a 50 basis point rate hike later this month in Washington, down from 77% prior to the data release.
"The market is falling on the news: and the tech sector , which is interest rate sensitive, is down the most," said Gina Bolvin, president of Boston-based Bolvin Wealth Management Group. "It appears that the US economy has been resilient enough to take Powell’s punch. The market now hinges on December’s rate hike. Will Powell put coal in our stockings?"
Earlier this week, payroll processing group ADP said private hiring slowed to around 127,000 new positions last month, the lowest tally since January of last year and well shy of Street forecasts of around 196,000.
New applications for unemployment benefits, however, fell by 16,000 to 241,000 last week, the Labor Department said yesterday, amid the second-lowest year-to-date tally for layoffs -- around 321,000 -- on record.
