NEW YORK - US employers added more jobs in November than expected and wage growth picked up from the prior month, indicative of labour demand that is still too strong for the Federal Reserve in its quest to stomp out inflation.

Non-farm payrolls increased by 263,000 last month after an upwardly revised 284,000 gain in October, a Labour Department report showed on Friday.

The unemployment rate held at 3.7 per cent as participation eased. Average hourly earnings rose twice as much as forecast after an upward revision to the prior month.

The median estimates in a Bloomberg survey of economists called for a 200,000 advance in payrolls and for the unemployment rate to hold at 3.7 per cent.

US stock futures tumbled and Treasury yields surged following the report, as investors anticipated a more aggressive Fed stance.

Job gains were concentrated in a few categories, led by growth in leisure and hospitality, healthcare and government. Meanwhile, employers in retail, transportation and warehousing and temporary help services cut workers.

The better-than-expected payrolls increase underscores the enduring strength of the jobs market despite rising interest rates and concerns of a looming recession.

The persistent mismatch between the supply and demand for workers continues to underpin wage growth and has led many economists to expect that businesses will be more hesitant to lay off workers in a potential downturn.

That said, some sectors are beginning to show more notable signs of weakening.

Many economists expect unemployment to rise next year – significantly in some cases – as tighter Fed policy risks pushing the United States into recession.

Fed chair Jerome Powell said earlier this week that a moderation in demand for labour is needed to bring the jobs market back into balance, and the central bank has seen only “tentative signs” of that so far.

He also noted the importance wage growth – and the labour market more generally – will play in determining the path of inflation.

The jobs report showed average hourly earnings rose 0.6 per cent in November, the biggest monthly advance since January, and were up 5.1 per cent from a year earlier.

Stock futures slumped and bond yields jumped after the solid jobs report, while the S&P 500 contracts pushed lower, signalling the US equity benchmark may wipe out this week’s rally.

Two-year US yields – which are more sensitive to imminent Fed moves – approached 4.4 per cent.

The dollar halted a three-day slide that drove it to the lowest since June.

Stock investors’ optimism around a cooling labour market and a Fed pivot is overdone, according to Bank of America strategists, who recommend selling the rally ahead of a likely surge in job losses next year. Their note was published before Friday’s jobs data.

“Bears (like us) worry unemployment in 2023 will be as shocking to Main Street consumer sentiment as inflation in 2022,” strategists led by Mr Michael Hartnett wrote in a note showing that global equity funds just had their biggest weekly outflows in three months.

“We’re selling risk rallies from here,” he said, reiterating his preference for bonds over equities in the first half of 2023. BLOOMBERG