Private employers step up hiring, trade deficit narrows
WASHINGTON (Reuters) - U.S. private-sector hiring rose in November at the fastest clip in a year, suggesting the labor market was improving enough for the Federal Reserve to soon start trimming its bond purchases.
But the optimism over the labor market was tempered somewhat by a report on Wednesday showing a fall in a gauge of services industry employment last month.
Still, the economy's outlook is brightening and other data showed exports hitting a record high in October and new home sales posting their largest rise in nearly 33-1/2 years.
Private employers added 215,000 new jobs to their payrolls last month, the ADP National Employment Report showed, the biggest rise in a year and beating economists' expectations for a gain of 173,000 jobs. October's gain was revised to 184,000 from 130,000.
The ADP data comes ahead of the government's much more comprehensive employment report for November on Friday, which includes both public and private sector hiring.
That report is expected to show an increase of 180,000 in nonfarm payrolls, according to a Reuters poll of economists, down from 204,000 in October.
While the ADP report does not have a good track record predicting nonfarm payrolls, economists said it raised the risk of a stronger-than-forecast reading on Friday.
U.S. Treasury debt prices fell on the employment data, the dollar rose and U.S. stocks dropped as traders speculated the Fed could begin to trim its bond-buying stimulus as soon as its next meeting on December 17-18.
"If the ADP does prove to be a good guide, a 200,000 plus gain (in nonfarm payrolls) might just be enough to persuade the Fed to begin its QE taper later this month," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.
Other economists said, however, the Fed was still more likely to wait until January or March to reduce its current $85 billion a month bond-buying pace.
SERVICES SECTOR SLOWS
Separately, the Institute for Supply Management said its services index fell to 53.9 last month from 55.4 in October. A reading above 50 indicates expansion in the sector. November marked the 47th-straight month of growth in the services sector.
The survey's gauge of services industry employment hit a 6-month low in November.
In a separate report, the Commerce Department said the nation's trade deficit fell 5.4 percent to $40.6 billion in October.
Exports jumped 1.8 percent to an all-time high of $192.67 billion, pointing to a pick-up in global demand that should help to support domestic growth in the fourth quarter. Exports had declined for three straight months.
Imports edged up a modest 0.4 percent to $233.3 billion in October, the highest in 1-1/2 years. That reflected increases in imports of industrial supplies and materials, as well as consumer goods.
"This is an encouraging sign for both U.S. manufacturing growth and the state of global demand," said John Ryding, chief economist at RDQ Economics in New York.
"There is marked acceleration in the imports of capital goods, which may signal a brighter picture for capital spending," he said.
When adjusted for inflation, the trade gap fell to $48.3 billion from $51.4 billion the prior month. This measure goes into the calculation of gross domestic product and suggested trade will again contribute to growth this quarter.
Petroleum exports were the highest on record in October. Exports to China hit a record high as did imports from that country. Still, the trade deficit with China narrowed in October.
China has been one of the fastest-growing markets for U.S. goods, though the pace of export growth slowed in recent months.
Exports to Canada and Mexico also reached all-time highs in October. While exports to the 27-nation European Union rose, they were outpaced by imports, resulting in a record trade deficit.
In another report, the Commerce Department said new home sales jumped 25.4 percent to a seasonally adjusted annual rate of 444,000 units in October, unwinding September's 6.6 percent drop. That suggested the housing market recovery remains intact despite higher mortgage rates.