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Nonfarm payrolls add 178K vs. 175K est.; unemployment rate 4.6% vs. 4.9% est.

The U.S. economy added 178,000 jobs in November, and the unemployment rate fell to 4.6 percent, according to a much-anticipated report Friday from the Labor Department.

The report, the last major employment data before the Federal Reserve's December policy meeting, was close to Wall Street expectations of 175,000, though economists surveyed by Reuters had expected the unemployment rate to stay at 4.9 percent.

Wages put a damper on the gains, with the annualized pace of average hourly earnings increases slumping to 2.5 percent.

"This positive jobs report is another indication that the U.S. economy continues to pick up steam," said Tony Bedikian, managing director and head of global markets at Citizens Bank. "We've seen a rally in equity markets, a stronger dollar and upward revisions to GDP as of late. The markets have priced in a Fed tightening later this month and I think today's report supports that view."

The unemployment rate matched the lowest level since August 2007, thanks in some part to a decline in the labor force participation rate to its lowest level since June and still near 40-year lows. A broader measure of joblessness that accounts for the underemployed and discouraged workers also fell, declining from 9.5 percent in October to 9.3 percent in November, the lowest since April 2008.

However, the number of workers counted not in the labor force surged by 446,000 to 95.06 million.

Wall Street was watching the numbers closely as the first indication of jobs market strength since the Nov. 8 presidential election.

A ladle is set on fire and heated to the correct temperature during the smelting process at the Quaker City Castings facility in Salem, Ohio.
Ty Wright | Bloomberg | Getty Images
A ladle is set on fire and heated to the correct temperature during the smelting process at the Quaker City Castings facility in Salem, Ohio.

This also will be the last major employment indicator before the Federal Open Market Committee meets Dec. 13-14 to decide whether the economy has improved enough to resume a rate normalization cycle that started a year ago.

The market is assigning about a 93 percent chance that the Fed's monetary policymaking arm will approve a quarter-point hike to its overnight funds level, a key benchmark for other interest rates.

However, a big disappointment could have pushed the central bank in the other direction.

"It's a little mixed. Job growth is slowing. That's about what you would have expected at this point in the business cycle," said John Canally, chief economic strategist at LPL Financial. "On balance, it keeps the Fed on track to tighten."

Professional and business services led the job creation with 63,000 new positions, followed by health care with 28,000. Construction gained 19,000.

Revisions knocked off 2,000 jobs from previous months' counts, with September getting bumped up from 191,000 to 208,000 and October moving from 161,000 to 142,000.

Part-time jobs jumped by 118,000 while full-time positions rose 9,000.