Employers around the U.S. added 321,000 jobs in November, blowing by analyst forecasts in what was the strongest performance by the labor market in nearly three years.
The unemployment rate remained unchanged at 5.8 percent, the U.S. Labor Department said Friday. The broader jobless rate, including people who worked fewer hours than they would like last month or those who have stopped looking for a job, fell to 11.4 percent.
"Overall, this is more evidence of how rapidly labor market conditions are improving," said Paul Ashworth, chief U.S. economist with Capital Economics, in a client note.
Analysts expected total non-farm payroll gains in November of 230,000. The Labor Department also revised upward the number of jobs created in September and October by a total of 44,000. The economy has added an average of 241,000 jobs this year, up from 194,000 in 2013.
The economy has picked up speed in the second half of 2014 after severe winter weather caused growth in the first three months of the year to plunge. The nation's gross domestic product -- the total value of goods and services produced in the same year -- has averaged a robust 4.2 percent over the last two quarters, although forecasters expect it to dip in the final three months of the year.
"We expect real GDP to grow at a solidly above-trend 3 percent rate through 2017, consistent with our view that the U.S. economy is still at an early- to mid-cycle stage." analysts with Goldman Sachs (GS) said in a research note this week.
One indication the labor market is recovering in earnest is that hiring has picked up across employers of all sizes, including small businesses, which account for most new job-creation. The government's latest labor report shows that payroll gains were widespread. Manufacturers added 28,000 jobs last month, the biggest increase since July of 2012, while hiring also was strong among health care firms. The construction industry jobs has recorded job gains for 11 straight months.
Perhaps most encouraging is the monthly jump in worker pay. Average hourly wages rose a stronger-than-forecast 0.4 percent in November, according to the Labor Department. That is the sharpest rise in wage growth in more than a year. The number of hours employees work per week also rose, often a prelude to stronger hiring.
Still, wages this year have grown only 2.1 percent. In a vibrant economy, wages should grow 3 to 4 percent a year. Consumer spending accounts for about two-thirds of U.S. economic activity, so a sustained period of wage growth is essential to help keep the recovery on track.
Consumers are especially benefiting from the sharp decrease in gas prices in recent months. Since the summer, prices at the pump have fallen roughly 30 percent to a national average of $2.75 a gallon. That is the lowest level in more than four years. Cheaper gas is boosting Americans' purchasing power just in time for the key holiday shopping season, while also reducing energy costs for U.S. businesses.
With the benchmark Consumer Price Index falling 0.2 percent in November, Americans are seeing substantial gains in inflation-adjusted income, notes Stuart Hoffman, chief economist with PNC Financial Services Group. He expects that to drive consumer spending.
Retailers have enjoyed a decent start to the holidays, with muted Black Friday sales offset by record online spending following the annual kick-off to the holiday shopping period. Merchants added a total of 50,000 jobs last month, suggesting they expect a strong holiday season.
"A festive season for U.S. workers should translate into a jolly time for retailers, and the economy," said Sal Guatieri, senior economist with BMO Capital Markets.
Citing the healthier job growth, some economists think the Federal Reserve could move sooner rather than later to start raising interest rates. Although inflation remains subdued, more "hawkish" Fed policy-makers are concerned that it could spike as unemployment continues to fall and wages rise. Most forecasters expect the central bank to begin rate hikes by mid-2015.