US wage growth held firm in November even as hiring dipped, offering evidence that the labour market remains robust enough to justify at least one more increase in short-term interest rates by the Federal Reserve later this month.

Year-on-year wage growth was unchanged at 3.1 per cent, equal to the quickest pace since April 2009, according to data released on Friday by the labour department. The world’s biggest developed economy added 155,000 jobs in November, compared to the 237,000 increase recorded in October and well below economists’ forecasts of 198,000.

The US economy remains on a solid footing as companies continue hiring amid worries over trade relations with China and a slowing housing market. Traders are expecting a further quarter-point rate rise from the Fed on December 19, which would be the ninth increase in the current cycle.

The outlook becomes murkier in 2019, however, as policymakers weigh risks including slower global growth and less fiscal stimulus from the US government. 

Monthly payroll gains averaged 212,500 during the first 10 months of the year, the latest figures showed, faster than the 182,000 logged in 2017. Hiring remains strong enough to keep the unemployment rate steady at 3.7 per cent, the lowest level since 1969. In November hiring was robust in sectors including healthcare, manufacturing, professional services and transport and warehousing. 

“The details of the November jobs report are broadly reflective of a labour market in good shape, despite increased financial market volatility, and trade and geopolitical uncertainties,” said Mickey Levy of Berenberg Capital Markets, adding that the report would keep the Fed on track for a rate rise this month.

US stocks initially made cautious gains in the wake of Friday’s jobs report before turning lower. The S&P 500 was down 0.75 per cent, while the Dow Jones Industrial Average fell 0.8 per cent and the Nasdaq Composite was off 1 per cent.

Treasury yields, which move inversely to price, whipsawed. Yield on the benchmark 10-year note initially dropped 2 basis points to 2.88 per cent but quickly recovered to trade 3 bps higher at 2.90 per cent. The two-year yield, which is more sensitive to Fed rates policy, was unchanged at 2.76 per cent after having come under mild pressure earlier.

The jobs report comes a day after Fed chair Jay Powell gave an upbeat assessment of the US economy and the job market. 

“Our economy is currently performing very well overall, with strong job creation and gradually rising wages,’’ Mr Powell said in remarks prepared for the opening of a rural housing conference in Washington on Thursday. “In fact, by many national-level measures, our labour market is very strong.’’

Some of the underlying details in the report were less encouraging. In particular, a measure of joblessness that includes people who are working part-time because they cannot get a full-time job rose to 7.6 per cent from 7.4 per cent the previous month. Working hours slipped, although analysts said this could be a result of cold weather. 

Peter Tchir, chief macro strategist at Academy Securities, said the numbers were “enough to give the Fed more caution about their current trajectory,” but “not bad enough to get the ‘recession’ drumbeat going.”

Fresh market turmoil this week has prompted traders to dramatically ratchet back bets on the pace of future Fed interest rate rises. While Fed fund futures, derivatives contracts investors use to wager on interest rates, show traders are still expecting the central bank to raise interest rates this month, they are increasingly sceptical on the outlook for further rises next year.

Assuming policymakers follow through with a quarter-point increase in December, Fed funds futures are pricing in a 34 per cent chance that the central bank does not touch interest rates again next year, and a 36 per cent possibility the Fed only lifts rates once. Markets are pricing in a mere 2 per cent chance that the central bank raises rates three times as it had indicated in September.

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