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Sturdy US payroll gains eyed, but wages still tepid

U.S. employment growth likely accelerated a bit in November, but wage gains probably remained tepid, leaving room for the Federal Reserve to hold interest rates near zero well into next year.

Nonfarm payrolls probably increased by 230,000 jobs last month after rising by 214,000 in October, according to a Reuters survey of economists. Seasonal hiring is, however, a wild card.

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The unemployment rate is forecast to hold steady at a six-year low of 5.8 percent.

A woman walks past a "Now Hiring" sign as she leaves the Urban Outfitters store at Quincy Market in Boston.
Brian Snyder | Reuters
A woman walks past a "Now Hiring" sign as she leaves the Urban Outfitters store at Quincy Market in Boston.

November would mark the 10th straight month that job growth has exceeded 200,000, the longest such stretch since 1994 and further confirmation the economy is weathering slowdowns in China and the euro zone, as well as a recession in Japan.

"The U.S. economy remains the best-looking house in an ugly neighborhood," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester Pennsylvania.

The Labor Department will release its closely watched employment report on Friday at 8:30 a.m. ET.

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Data ranging from manufacturing to automobile sales have pointed to momentum in the economy.

But strengthening labor market conditions have yet to spur faster wage growth, a key factor that will determine the timing of the U.S. central bank's first rate hike.

Average hourly earnings are forecast rising 0.2 percent in November, which would leave them up 2.0 percent from a year ago. That's well below the increase of 3 percent or more economists say would make the Fed comfortable lifting benchmark overnight rates from near zero, where they have been since December 2008.

No rush

"The fact that wage growth is low provides support to the Fed view that there is no rush to raise rates," said Thomas Costerg, an economist at Standard Chartered Bank in New York.

Many economists expect the Fed to wait until mid-2015 before hiking rates.

Soft wage growth has been blamed on an array of factors, including still-ample labor market slack and low-paying jobs, especially in the retail, leisure and hospitality sectors, that have tended to dominate job gains.

But with the labor market gradually tightening, wage growth is expected to pick up next year.

"We expect wages will firm going forward. Staffing companies have been reporting for months that firms are increasingly willing to pay more for the workers they need," said Michelle Girard, chief economist at RBS in Stamford, Connecticut.

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Details of November's employment report are expected to be upbeat. Most of the measures Fed Chair Janet Yellen tracks to gauge the amount of slack in the labor market are seen showing further improvement.

Job gains are also expected to broad-based, in line with recent trends. Private payrolls are forecast rising 218,000, with sturdy gains in retail and transportation, reflecting hiring for the holiday season.

Government employment is expected to have increased 12,000.