US companies created the most jobs in nearly a year in November, adding to cautious optimism that the country's battered labour market is working its way toward healing. Better-than-expected housing and regional factory data released on Wednesday reinforced the view that the economy should avoid recession, though growth is unlikely to be brisk.
"All of this confirms the economy, after slowing in the late spring and early summer, is back firmly at its 2 (percent) to 2.5 percent growth rate," said Steve Blitz, senior economist at ITG Investment Research in New York. Even so, Blitz added, "Firstly, I need to temper the enthusiasm that these numbers indicate that economic growth is accelerating, and secondly, it's still a very dangerous world out there."
Janet Yellen, the vice chair of the US Federal Reserve, said earlier in the week the central bank still has room to ease monetary policy further. The Fed has bought more than $2 trillion in long-term securities in efforts to boost the economy. The ADP National Employment Report on Wednesday showed private employers added 206,000 jobs this month, surpassing economists' expectations for a gain of 130,000 jobs. It was the biggest gain since December 2010.
The data set an optimistic tone ahead of Friday's more comprehensive government report on the labour market and some economists raised their forecasts. The weak labour market remains one of the biggest hurdles for the economic recovery and is a major concern for US President Barack Obama ahead of next year's elections. Friday's non-farm payrolls report, which includes both public- and private-sector employment, is expected to show a rise in overall non-farm payrolls of 122,000 this month.
While economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, ADP's track record as a predictor has varied. Deutsche Bank raised its forecast for Friday to 150,000 from 125,000, while Capital Economics increased its expectations to 140,000 from 100,000.
Meanwhile, a separate report showed the number of planned layoffs at US companies edged down marginally in November, though job cuts for the year so far have surpassed 2010's total. On the housing front, the National Association of Realtors Pending Home Sales Index jumped 10.4 percent to 93.3 from 84.5 the month before. It was the biggest monthly gain since November 2010. But that report was tempered as separate data showed applications for US home mortgages slumped for the third week in a row last week, hit by a drop in demand for refinancing.
Business activity in the US Midwest grew faster than expected in November, adding to expectations that national manufacturing data should show an uptick in growth when it is released on Thursday. Separate data showed the rebound in US non-farm productivity growth was not as strong as previously estimated in the third quarter, while wages declined for two straight quarters. Productivity increased at a 2.3 percent annual rate, the Labour Department said, a downward revision to its previous estimate of 3.1 percent.