Upbeat U.S. data points to growth momentum
WASHINGTON (Reuters) - U.S. private-sector hiring rose in November at the fastest clip in a year, opening the door wider for the Federal Reserve to start trimming its bond purchases within the next few months.
Other data on Wednesday also pointed to a brightening outlook, with the services industry expanding at a decent pace last month and exports hitting a record high in October.
There was also good news on the housing market as new home sales posted their largest increase in nearly 33-1/2 years.
"The economy seems to be building enough momentum that growth should accelerate as we move through the first part of next year," said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania.
Private employers added 215,000 new jobs to their payrolls last month, according to payroll processor ADP.
It was the biggest rise in a year and beat economists' expectations for a gain of 173,000 jobs. At the same time, the figure for October was revised up to 184,000 from 130,000.
The jobs data comes ahead of the government's much more comprehensive employment count for November on Friday.
That report, which covers both public and private sector hiring, is expected to show an increase of 180,000 in nonfarm payrolls after a 204,000 rise in October, according to a Reuters poll of economists.
Some economists said the ADP data suggested the government report could show a larger gain than the consensus forecast. Their optimism was tempered a bit by a gauge of services industry jobs showing growth dropping to a six-month low for November.
The upbeat tone was also captured by a separate report from the Fed on Wednesday that described the economy as expanding at a "modest to moderate pace" in October and early November.
The signs of economic momentum weighed on U.S. Treasury debt prices as traders speculated the Fed could begin to trim its bond-buying stimulus as soon as its next meeting on December 17-18. U.S. stocks were trading lower, while the dollar reversed gains versus the euro and the yen.
"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 STILL GROWING
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.
A sub-index of services industry employment fell to its lowest level since May, but also stayed in expansion territory.
"The data are still suggesting at least a modest net pickup in the trend in overall growth recently, even with this somewhat weaker reading for November," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.
A separate report from the Commerce Department showed the nation's trade deficit shrank 5.4 percent to $40.6 billion in October, suggesting trade will likely contribute to growth this quarter.
Exports, which had declined for three straight months, hit an all-time high, pointing to a pick-up in global demand.
Imports also rose, reaching a 1-1/2 year high, as demand for consumer goods and industrial supplies and materials increased.
"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 a marked acceleration in the imports of capital goods, which may signal a brighter picture for capital spending."
A survey of U.S. chief executives found spending on capital goods and hiring were expected to rise in the next six months.
In October, petroleum exports were the highest on record. Exports to China, Canada and Mexico reached all-time highs in October, while exports to the 27-nation European Union also gained.
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, more than unwinding September's 6.6 percent drop. That suggested the housing market recovery remains intact despite higher mortgage rates.
"Today's data shows evidence of the persistence of the positive momentum in the housing market," said Ward McCarthy, chief financial economist at Jefferies in New York. "Strong new home sales will translate into rising building permits and housing starts."