U.S. employers added 271,000 jobs in October, the largest gain this year and a sign of economic growth that may position the Federal Reserve to raise interest rates next month.
The unemployment rate dipped to a seven-year low of 5% and wages rose at the fastest pace since 2009, the Labor Department also announced Friday. The job growth easily beat analysts’ expectations of about 185,000 additional positions.
“It’s a solid labor market,” Michael Feroli, chief U.S. economist at JPMorgan Chase in New York, told Bloomberg. “The report is pretty good across the board. December is now a very high likelihood for the Fed to hike rates.”
Economists had said ahead of Friday’s report that monthly job gains above 150,000 in October and November would be sufficient grounds for the first increase in overnight borrowing costs since 2006.
“The employment report had everything you could have asked for,” Michelle Meyer, deputy U.S. chief economist at Bank of America Merrill Lynch in New York, told Reuters. “It more than offsets the weakness in the prior two months and positions the Fed to hike rates in December.”
The unemployment rate peaked at 10% in 2009 and is now closing in on what many economists believe is its lowest sustainable level.
However, the number of persons employed part-time is still high, edging down by 269,000 to 5.8 million in October, the Labor Department said. The share of people participating in the labor force has fallen to its lowest levels in three decades.
“Though much of the decline is due to demographic changes, many workers have become so discouraged about their prospects of finding a job that they’ve given up the search,” The Washington Post noted.
Weaker payroll gains in August and September had dampened talk of an interest rate hike. But after Friday’s report, investors have raised to about 70% the probability of a rate increase at Fed policy makers’ December meeting, according to pricing in the federal funds futures market.
“We’ve indicated that conditions look like they could be right for an increase,” Chicago Federal Reserve Bank President Charles Evans told CNBC on Friday.