Payrolls and Wages Blow Past Expectations

Job growth was much better than expected in November despite the Federal Reserve’s aggressive efforts to slow the labor market and tackle inflation.

Nonfarm payrolls increased 263,000 for the month while the unemployment rate was 3.7%, the Labor Department reported Friday. Economists surveyed by Dow Jones had been looking for an increase of 200,000 on the payrolls number and 3.7% for the jobless rate.

The monthly gain was a slight decrease from October’s upwardly revised 284,000.

The numbers likely will do little to slow a Fed that has been raising interest rates steadily this year to bring down inflation still running near its highest level in more than 40 years.

In another blow to the Fed’s anti-inflation efforts, average hourly earnings jumped 0.6% for the month, double the Dow Jones estimate. Wages were up 5.1% on a year-over-year basis, also well above the 4.6% expectation.

“To have 263,000 jobs added even after policy rates have been raised by some [375] basis points is no joke,” said Seema Shah, chief global strategist at Principal Asset Management. “The labor market is hot, hot, hot, heaping pressure on the Fed to continue raising policy rates.”

Construction added 20,000 positions, while information was up 19,000 and manufacturing saw a gain of 14,000.

On the downside, retail establishments reported a loss of 30,000 positions heading into what is expected to be a busy holiday shopping season. Transportation and warehousing also saw a decline, down 15,000.

“The Fed is tightening monetary policy but somebody forgot to tell the labor market,” said Fitch Ratings chief economist Brian Coulton. “The good thing about these numbers is that it shows the U.S. economy firmly got back to growth in the second half of the year. But job expansion continuing at this speed will do nothing to ease the labor supply-demand imbalance that is worrying the Fed.”