(Karen Bleier/AFP/Getty Images)

We’ll put the jobs day caveats first because they’re bigger than usual this time: One month’s survey doesn’t tell us a whole lot about how the economy is doing, offers only a partial picture subject to major revisions, and so on and so forth. That’s even more true than usual this month because the report was influenced by the government shutdown, both in predictable ways (federal employees who were furloughed were to count as unemployed, on a temporary layoff) and unpredictable (the survey was taken a week late, so peoples’ memories of whether they were working might be hazy).

That said, this is a good report. It eases fears that the jobs recovery had petered out or at least downshifted significantly.

At 8:29 Friday morning the best guess of analysts was that the economy had added 138,000 jobs a month from July through October. But the October job growth number smashed their expectations, coming in at 204,000 net new jobs (versus the 120,000 forecast), and the report also revised August and September numbers up by a combined 60,000. Presto chango, the economy has added 174,000 jobs a month over that period.

And the survey of employers on which that data are based should not (in theory at least) have been affected by the government shutdown, or at least not much. Furloughed workers are supposed to still count as employed in that survey, though there could be some government contractors who were out of work due to the shutdown who did not count. But, if anything, that effect should make the numbers worse, not better.

The unemployment rate, by contrast, was deeply affected by the shutdown, and the survey of households on which it is based was, to use a technical term, screwy. It reported a 448,000 increase in the number of people unemployed on temporary layoff, which is what is to be expected as that includes furloughed government workers. But it also includes 720,000 people who were counted as dropping out of the labor force entirely, which is a downright outlandish number (the last time the size of the labor force fell that much in a single month was the end of 2009, when the economy was in much worse shape).

In other words, the caveats about being skeptical of this report apply much more strongly to the household survey, on which the unemployment rate is based, than they do the establishment survey, on which the payrolls numbers are based.

There are some important implications of that for policy. Federal Reserve officials have been on the lookout for signs that there is substantial improvement underway in the job market, which would be their cue to wind down their program of monthly bond purchases. Some officials have mentioned 200,000 jobs a month as their definition of “substantial improvement”

When the Fed meets in December, officials who are ready to taper bond-buying will have a much stronger case than they did at their last meeting, which came on the heels of a shutdown and two disappointing jobs readings. (Of course, by the time they meet  on Dec. 17-18, they will also have the November jobs numbers in hand, so their action will be premised as well on what those show).

In other words, if the payroll numbers keep coming in the way they did in October, and the unemployment rate and related indicators prove to be reflections of a shutdown-induced anomaly, then the recovery is on track and the Fed may be ready to start winding down its era of interventionism. That’s why stock markets opened flat despite the better-than-expected payroll numbers.

In other words, with the Fed on a knife’s edge in deciding when and how fast to pull back on its bond buying, there exists an odd dynamic between markets and the economy in which down is up, dark is light, and good is bad.

Correction: This post previously said that the last time the labor force changed by as much as it did in October was in 2003; it was 2009.

The U.S. economy added a solid 175,000 jobs in February, despite harsh winter weather that many analysts expected would curtail hiring, according to government data released Friday morning.

The report from the Labor Department showed the job market has steadily improved since hiring plunged at the end of last year. On Friday, the government actually increased its estimate for job creation in December and January. But the unemployment rate ticked up to 6.7 percent last month as more people entered the labor force to look for jobs. The number of long-term unemployed -- those who have been out of work for six months or more -- rose by 203,000 to 3.8 million.

“The overall impression is that things did slow down, but not as drastically as the December and January data suggested,” said Kevin Logan, chief U.S. economist at HSBC.

The slowdown in hiring this winter, coupled with recent weak data from the housing and manufacturing industries, has raised questions about the strength of the nation’s economic recovery. The strong growth enjoyed during the second half of last year has not carried into 2014, despite predictions that this would be a breakout year for the economy.

Some analysts have argued that the data was skewed by the record-setting extreme winter. The economy has been buffetted by below-zero temperatures, historic snowfalls and disruptive ice storms. More than half of the nation's lower 48  states were covered in snow early this week, the most since NOAA began tracking the data a decade ago.

Snow cover and depth on March 5 (NOAA)

But the job growth in February complicates that theory. A major snowstorm hit much of the eastern United States just before Valentine's Day, when the government was surveying businesses about their hiring plans. That was expected to throw a wrench in February's data, yet it still beat Wall Street's expectations.

“This is a good, resilient report, especially given the weather," Labor Secretary Thomas Perez said in an interview Friday. "It shows that the economy continues to move in the right direction.”

U.S. stock markets opened higher on the news but gave up much of those gains by early afternoon. The Dow Jones Industrial Average was barely in positive territory, up just one-tenth of a percent. The broader Standard & Poor's 500-stock index and the tech-heavy Nasdaq were in the red.

The stronger outlook for the recovery at the end of last year prompted the Federal Reserve to begin scaling back the amount of money it is pumping into the economy. The Fed has bought more than $1 trillion in bonds to help push down long-term interest rates.

In congressional testimony last week, Fed Chair Janet Yellen said the central bank would be “attentive to signals” that the recovery could be faltering, but that it is still trying to determine how much weather has affected the data. Other central bank officials have suggested that the bar for changing plans is high. In an interview with The Washington Post, Atlanta Fed President Dennis Lockhart said he expects the data will fluctuate.

“The variability that comes sort of normally from quarter to quarter or month to month is not likely in my mind to justify a change,” he said Thursday. “It would have to be fairly material.”

Meanwhile, the Fed is also debating changes to its guidance on when it will increase the target for short-term interest rates. Officials had vowed to keep them at zero at least until the unemployment rate hit 6.5 percent. The Fed is almost certain to discuss the issue when it meets in Washington later this month, and officials could drop that reference altogether in favor of more generic language.

New government data released Friday morning showed the nation added 288,000 jobs in April, a reassuring sign that the economy has picked up momentum since stalling out over the winter.

The hiring spree surpassed most analysts' expectations and is the strongest showing in more than two years. Businesses added workers across a broad array of sectors, including business services, retail and construction. The unemployment rate plunged to 6.3 percent -- the lowest level since 2008 -- though part of that was due to a shrinking labor force.

The upbeat report provided a convincing counterpoint to data released earlier this week that revealed economic growth was virtually flat during the first quarter. Many analysts attributed that weak reading to the unusually cold winter and argued that a spring thaw is already underway. The Labor Department also increased its estimates of hiring during the previous two months by 36,000 net jobs.

"It's just what the doctor ordered in terms of a further piece of confirmation that the winter was abnormal," said Eric Lascelles, chief economist at RBC Global Asset Management. "We can just expect further economic normalization."

Wall Street opened higher on the news, but the major U.S. indexes were mixed at mid-day. The blue-chip Dow Jones Industrial Average inched into the red, while the broader Standard & Poor's 500-stock index was up slightly. The tech-heavy Nasdaq gained 0.2 percent.

The jobs report contained at least one ominous note. The nation's workforce shrank by more than 800,000 workers in April, sending the labor force participation rate plummeting 0.4 percentage points to 62.8 percent. The Labor Department said most of that decline was due to fewer people joining the workforce.

“People are not giving up in the labor force," U.S. Labor Secretary Thomas E. Perez said in an interview. “That would be a fundamentally different diagnosis of where we are now.”

The number of re-entrants -- people looking for a job after being out of the labor market -- plunged by 417,000, the largest drop on record. New entrants declined by 126,000. Many high school and college students typically begin entering the job market in April, but the number of people younger than 25 in the workforce fell by 484,000. The participation rate for teens ages 16 to 19 hit the second-lowest level ever.

"I would actually say that this big drop in the unemployment rate is not consistent with a really robust labor market because that labor force participation rate did not rise, and the employment-to-population ratio is shockingly low," said Tara Sinclair, an economics professor at George Washington University and economist at Indeed.com, one of the nation's largest sites for job postings.

Another factor driving the smaller workforce could be the expiration of benefits for the long-term unemployed at the end of last year. To qualify for the payments, workers have to show they are looking for jobs. Without the incentive of unemployment benefits, many of them might have ended their search.

The U.S. Senate voted in April to extend unemployment benefits through May for workers who have been out of a job for six months or longer, but the measure faces a rocky road in the House. On Thursday, Sens. Jack Reed (D-R.I.) and Dean Heller (R-Nev.), the bill's sponsors, urged the House to move quickly.

"Emergency unemployment insurance is a lifeline for job seekers, and restoring it will strengthen the recovery by bolstering demand at a critical time," Reed said.

Friday's data showed the number of long-term unemployed fell slightly to 3.5 million in April, accounting for roughly one-third of America’s jobless. Meanwhile, about 7.5 million people were in part-time jobs for economic reasons. Fed Chair Janet Yellen has cited those dynamics as reasons to keep the central bank’s benchmark short-term interest rate low for years to come.

But the sharp drop in unemployment could complicate the Fed's task. Several top officials, including San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart, have said they believe the first rate increase should come when the jobless rate falls to about 6 percent. Both officials had predicted that would not happen until next year, but that goal post is now much closer.

April’s pickup in hiring also helps validate the Federal Reserve’s decision this week to continue scaling back its support for the recovery. The nation’s central bank is reducing its monthly bond purchases by $10 billion to $45 billion -- about half the amount it was pumping into the economy every month last year. The Fed has tied its stimulus to the health of the labor market, and Friday’s data clearly show it is improving.

The construction industry provided one of the biggest boosts to job creation last month. The sector added 32,000 jobs, concentrated in heavy and civil engineering and residential building. Over the past year, it has hired 189,000 workers, with the bulk of those gains coming within the last six months.

The main hiring engine was the professional and business services sector, which created 75,000 net jobs. Retailers and bars and restaurants each added more than 30,000 jobs. The health care industry gained 19,000 positions.

Alan Shull attended a job fair in Portland, Ore., in 2012. (AP Photo/Rick Bowmer, File)

America’s hiring spree kicked into full gear in June as the economy added more than 200,000 jobs for the fifth month in a row, according to government data released Thursday.

The streak is the longest since the late 1990s and provides convincing evidence that the recovery has rebounded after unexpectedly shrinking during this year’s harsh winter. The Labor Department reported 288,000 net new jobs were created in June, and the unemployment rate dropped to 6.1 percent.

“We’re achieving escape velocity," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. "It's all there for some real strength."

Markets jumped on the news Thursday, with the blue-chip Dow Jones average up nearly 0.5 percent in morning trading -- and breaking 17,00o for the first time. The broader Standard & Poor's 500-stock index was up 0.4 percent.

The solid numbers reinforced other encouraging data released this week suggesting the economy may finally be ready for liftoff. Auto sales -- a consistently bright spot in the recovery -- heated up even more in June. They clocked in at 17 million at an annualized rate for the best month in eight years. In addition, a closely watched private indicator of the labor market by human resources consulting firm ADP offered a similarly stellar prediction 0f 281,000 jobs added last month. The spike was driven in part by the construction industry, which created the most jobs since 2006.

Perhaps most important, Gallup found that 45 percent of Americans were working full-time in June, one of the highest rates since the polling company began tracking the figure in four years ago. The government data released Thursday mirrored those results, with the employment-to-population ratio rising to 59 percent, the highest level since 2009.

“While few might agree that the economy has fully recovered from the Great Recession, there is no doubt that the job market is much stronger now than in prior years,” Gallup said in its report.

The job gains were spread across a range of sectors, indicating the recovery is broad-based. Leading the way was professional and business services, which added a net 67,000 jobs. Retail and food service were next, while manufacturing and financial services also enjoyed significant gains.

The government data also showed average hourly earnings jumped six cents to $24.45. Estimates of hiring in April and May were also revised upward by 29,000 net new jobs.

The strong hiring in June far exceeded the consensus forecast of about 215,000 jobs and could present a quandary for the Federal Reserve. The nation's central bank is in the midst of phasing out its trillion-dollar bond-buying program and is starting to debate when it should raise short-term interest rates, which stand at zero. The Fed has been treading carefully for fear of undermining the recovery or disrupting the markets. But an increasingly vocal chorus of critics contend that the rapidly improving labor market is a sign that the central bank may have waited too long to tighten policy.

"I would say the Fed is really behind the curve," LaVorgna said.

Indeed, the drop in the unemployment rate in June means it is already at the level that the Fed had predicted it would land at the end of the year. But Fed Chair Janet Yellen has argued that the decline may moderate as a stronger labor market pulls in workers who had given up looking for a job.

Thursday's data included several reminders of the stubborn weaknesses that have bedeviled the nation’s progress. The number of long-term unemployed workers declined but remained elevated at more than 3 million, and they represent about a third of those without a job. The ranks of people working part-time even though they would like more hours actually increased by more than 250,000. Economists say those factors help make the unemployment rate a less reliable reading of the state of the recovery than it once was.

“This is one of the strongest [jobs] reports we’ve seen since the end of the Great Recession," U.S. Labor Secretary Thomas Perez said in an interview. But, he added, "we also know there is a tremendous amount of unfinished business. Too many people remain at the sidelines."

Simon Dawson/Bloomberg

If you like statistics involving arbitrary round numbers—and who doesn't?—here's a good one. For the first time since early 2000, the economy has added over 200,000 jobs for five months in a row. Furthermore, June's 288,000 net new jobs were enough to push unemployment down to 6.1 percent, its lowest level since September 2008.

By our diminished post-crisis expectations, this was about as good as a jobs report gets. Unemployment fell for the good reason that more people were getting work rather than more people were giving up, as the labor force grew by 81,000. Revisions, which tend to be pro-cyclical, added another 29,000 jobs to the previous two months. And the 2.5 million jobs the economy has added the past 12 months make it the best year of the recovery so far.

And, as you can see below, the 3-month average of job growth—271,000 now—is almost the best of the recovery, too. The only times it's been better were after the Census hiring temporarily boosted the numbers in 2010, and when the economy briefly looked like it was achieving escape velocity in early 2012.

But, as Neil Irwin asks, is this time different? In other words, will this latest jobs boom turn out to be just another blip, or will it be the start of a new and faster phase of the recovery?

Well, one reason for optimism is something that sounds (and is) profoundly boring, yet is still important: seasonal adjustments. See, the jobs number you hear isn't the actual number of jobs the economy has added. It's the number of jobs the economy has added compared to how many it's expected to at that point of the year. The idea is that the economy pretty predictably adds more jobs during some times—say, Christmas shopping season—than others, so we need to adjust the raw numbers to get at the economy's underlying strength.

But the problem is that the financial crisis messed up these seasonal adjustments for a few years. That's because the worst job losses happened in the winter of 2009, and our seasonal models, which didn't know about Lehman but did know about the calendar, naïvely assumed it had to be due to the weather. So these models started adding more jobs than usual to the next few winters to make up for what they thought was the new pattern of massive job losses in January and February. That's why it looked like job growth was surging every winter, and crumbling every summer—because the models were adding more to the former and subtracting more from the latter.

And that's also why the upswing in January 2012 was so different from the one today. Back then, it was mostly a statistical mirage. But today, these seasonal distortions have faded and the recovery is real—or at least realer. Car sales, for example, just grew at their fastest pace in eight years, and unemployment is falling far faster than policymakers predicted. Indeed, just a few weeks ago, the Federal Reserve forecast that unemployment would be 6.0 to 6.1 percent by the end of the year. It's 6.1 percent already.

But the big question is whether this will be enough to bring back the shadow unemployed. It hasn't yet. In June, there were 275,000 more people working part-time for economic reasons. And though it sounds like good news that long-term unemployment fell by 293,000, it probably isn't when you consider that, as Ben Casselman shows, most of them are giving up rather than finding work. In other words, there's still plenty of shadow slack, and that probably explains why average hourly earnings have barely kept up with inflation, up just 2 percent the past year.

The good news is that gives the Fed plenty of scope to keep rates low, and, hopefully, help support a stronger recovery that reaches more people. The better news is that it finally might, just might, be starting to already.

(Ty Wright/Bloomberg)

The U.S. economy added a solid 223,000 jobs in April, according to government data released Friday morning, a key sign that the labor market is regaining its footing after taking a slide earlier this year.

The unemployment rate fell to 5.4 percent, a seven-year low.

The latest numbers offer encouragement that the recent economic slowdown marks a temporary slip — one that is at least partly weather-related — rather than a sign of deeper problems. Both the jobs growth in April, as well as the tick down in the unemployment rate, was almost exactly in line market expectations.

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“This was a good and important number,” said Mark Luschini, a chief investment strategist for Janney Capital Management. “It suggests the underlying momentum in the economy is sufficiently strong,” and that performance in the winter was “somewhat anomalous.”

In 13 of the last 14 months, the nation has added at least 200,000 jobs, a period of hiring unmatched in 15 years. But starting this year, the pace of job growth took a modest step back. And in March, it cratered, with only 85,000 positions created — the worst showing since June 2012. The March hiring number initially stood at 126,000, but was revised downward Friday.

Economists now say that the hiring slowdown was likely influenced by a West Coast port strike that choked off supply lines and by a severe winter that kept shoppers and construction crews indoors. In Friday’s data, there was at least one clear sign of the hiring bounce-back: The construction industry added 45,000 jobs in April, its best mark in more than a year, after losing 9,000 in March.

Still, not all of the stresses on the economy will be short-lived as the winter. With the price of oil down some 40 percent from last summer, drilling companies have been forced to make major cutbacks and lay off thousands of workers. Meanwhile, a strong dollar is trimming exporters' profits and widening the trade deficit, a drag on growth.

In the first quarter of 2015, the U.S. economy expanded just 0.2 percent. The growth figure will be revised later this month, and many analysts say the new number could fall below zero, given a recent indication that the March trade deficit was even wider than expected.

The stronger dollar, coupled with weaker growth in China and Europe, has “made companies here just be a bit more cautious about what might transpire in 2015 and 2016,” said Frank Friedman, the chief financial officer and global chief operating officer of Deloitte LLP.

The April hiring number was important, though, because it offered the first insights about the second quarter. Markets welcomed the news Friday morning, with stocks jumping and the dollar rising against the euro.

The latest data comes as the Federal Reserve is debating when to hike interest rates, which have stayed near zero for more than six years. Though the central bank has given few signals about its timing, most investors expect the Fed to hold off on any move until the economy shows signs that it has broken from its slowdown.

The numbers growth in April was “not too hot that it will force the Fed’s hand in June, and not too cold that it pushes the first rate hike into 2016,” Scott Anderson, a Bank of the West chief economist, said in an e-mail.

One of the key barometers for determining the rate hike timing is wage growth, which has remained relatively tame even as the unemployment rate has fallen. The latest numbers Friday showed only modest wage increases, with average earnings up only 3 cents hourly from March. Over the last 12 months, average earnings have increased 2.2 percent, which is roughly in line with the trend during the six-year recovery from the Great Recession.

Before Friday, there was some separate and more promising news about wage growth. According to a separate series of Labor Department Data, known as the Employment Cost Index, nominal wages over the last 12 months have risen 2.6 percent. That is the largest yearlong gain since 2008.

Economists have been awaiting signs that the United States is nearing full employment, a situation where enough people have jobs that employers must boost wages to compete for new workers. Though job growth was strong in April in the health care and construction sectors, there were again major losses in the mining industry — a result of lower oil prices that have forced cutbacks among American drillers and their suppliers. Another 15,000 mining jobs were lost in April; mining employment has declined by 49,000 since the year.

In April, the labor force participation rate — the share of people who hold jobs or are looking — ticked up slightly to 62.8 percent. Though the number is near historical lows, last month some 166,000 people entered the labor force, a sign that at least some Americans are coming off the sidelines.

[CORRECTION: An earlier version of this story misstated the number of jobs added in April. Net job growth for the month was 223,000, not 230,000.]

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Martell Gerald applies for a job at the Bank of America booth at the Congressional Black Caucus for The People Jobs Initiative career fair in Los Angeles. (Jonathan Alcorn/Reuters, file photo)

The labor market continued its resurgence in May, the government reported Friday, with the U.S. economy adding 280,000 jobs. The jobs number beat analysts' expectations of 225,000 jobs.

The unemployment rate went up a notch to 5.5 percent, but that increase was due to a rise in the number of people entering the workforce for the first time and looking for jobs.

The data from the Labor Department indicate that the U.S. jobs recovery is continuing at a decent clip, a sign that the economy has underlying strength despite other recent data showing the recovery in a slump. The estimate of job growth in March was revised up from 85,000 to 119,000, while April's tally ticked down from 223,000 to 221,000 jobs added.

“People have some confidence that they can get a job," Labor Secretary Tom Perez said in an interview. “These all point to an economy with the wind at its back.”

The sectors with the biggest job gains were professional and business services, adding 63,000 net new jobs, and leisure and hospitality, which added 57,000 jobs. The health care industry generated 47,000 jobs.

In addition, workers enjoyed solid wage gains in May. Average hourly earnings rose 8 cents to $24.96, though the rate of growth compared to a year ago still hovers around 2 percent.

The job market has become one of the bright spots in the country’s economic recovery after spending years on life support. Jobs are being created at the fastest pace since the dot-com boom of the late 1990s, government data show. The number of people out of work for at least six months has dropped over the past year, and there are signs that so-called underemployment -- people taking jobs that don’t use all their skills -- is finally abating.

Analysts pointed to strong private readings of the labor market and falling unemployment claims to bolster their hopes for a solid jobs report Friday. Payroll processor ADP earlier this week predicted that the economy added 201,000 jobs in May, breaking a five-month streak of declining growth. Meanwhile, a separate report by the government Thursday showed the number of people filing for unemployment insurance for the first time dropped last week by 8,000 to 276,000 -- the fewest number since the early 2000s.

Robust hiring is helping to drive a recovery in the beleaguered real estate market, particularly in the West. The National Association of Realtors index of pending home sales for that region jumped 16 percent in April compared to a year ago. That helped push the national numbers to their highest level since the red-hot market of 2006.

“More people working means more income and more potential homeowners. More jobs also entail more office leasing and increased rental housing demand,” NAR chief economist Lawrence Yun wrote in a blog post Thursday. “Nothing like jobs to support real estate.”

Yet rapid job growth has not translated into a stronger economic expansion. Revised government data released last week showed the U.S. economy shrank during the winter months. Consumers curtailed their spending, a stronger dollar weighed on exports and bad weather and a strike at ports in the West Coast took the wind out of the recovery’s momentum. Estimates of growth for the second quarter have been anemic.

“It would not be the first time this recovery has proceeded in fits and starts,” Federal Reserve Gov. Lael Brainard said in a speech this week. “The underlying momentum of the recovery has proven relatively susceptible to successive headwinds, which have kept overall economic growth well below the average pace of previous upturns.”

That is complicating the Fed’s efforts to withdraw its support for the economy. The central bank has kept its key interest rate at zero for more than six years in an effort to boost spending, lending and investment. But amid an improved outlook for the economy, Fed Chair Janet Yellen has said she expects to begin raising that rate this year -- a move that could send waves not only throughout Wall Street but also influence the cost of a mortgage and other consumer credit.
Several Fed officials, along with the International Monetary Fund, are urging the central bank to wait until next year to hike rates.

The job market’s winning streak continued in July as the economy added 215,000 positions, according to government data released Friday, providing more evidence of an economy that is slowly but steadily returning to normal.

The Labor Department reported that hiring was strongest in the retail and health care sectors, while the mining industry continued to shed jobs. The unemployment rate remained unchanged from the previous month at 5.3 percent.

The solid yet unremarkable report indicated that the recovery is chugging along. Hiring came in just shy of analysts’ expectations, and there was little in the details of the data to be concerned about: Wages nudged up in July, and workers logged more hours. The labor force expanded slightly, and youth unemployment dropped.

“I think it’s a sign of progress that we’re seeing decent job gains every month,” said Scott Anderson, chief economist at Bank of the West. “Boring is good.”

Wall Street opened lower on the news and slid throughout the morning. The major U.S. stock market indexes were down more than half a percentage point shortly before noon.

The jobs report provides a critical piece of information for the Federal Reserve as it considers whether the economy can withstand an increase in its benchmark interest rate. The nation’s central bank generally raises its target rate when it is trying to rein in an overheating economy and lowers it when it wants to stimulate activity. In the wake of the financial crisis, the Fed slashed its target rate to zero, a dramatic move intended to spur consumer demand and business investment.

But seven years later, the central bank’s target rate is still at zero. Fed Chair Janet Yellen has said she expects the rate will rise before the year is over. In its most recent policy statement, the central bank said it will move once it is “reasonably confident” that inflation is moving toward its goal of 2 percent and it sees “some” further improvement in the labor market.

Many on Wall Street have parsed those remarks as implying that the Fed could act as soon as September, when it holds its next meeting. But others believe the central bank will wait until December -- or even until 2016 -- to be sure that the recovery is on track. Friday’s jobs report is unlikely to change any minds.

"We view this report as easily clearing the hurdle needed to keep the Fed on track for a September rate hike," Rob Martin, an economist at Barclays, wrote in a note to clients. "We view the bar for not moving as now much higher."

In an interview with the Wall Street Journal this week, Atlanta Fed President Dennis Lockhart said that he was ready to move in September as long as the economic data did not prove disappointing. But Fed Gov. Jerome Powell struck a more cautionary tone in comments to CNBC, citing the need to evaluate Friday’s jobs report among other forthcoming statistics before deciding on timing.

"The sooner the Fed moves, the more room it creates to take action during the next downturn," said Joseph Lake, global economist for The Economist Intelligence Unit.

One of the reasons the Fed has been so cautious is because previous growth spurts in the recovery failed to take hold. Economic growth slowed markedly during the first quarter of the year, and monthly hiring fell below the baseline of 200,000 new jobs that many analysts believe is the bar for for a healthy labor market.

Friday’s jobs report served as confirmation that the dip was just a blip. Economists pointed to hiring gains across a broad swath of industries, including an increase of 15,000 manufacturing jobs. Average hourly earnings in July rose 5 cents to $24.99, up 2.1 percent over the year. The government also upped its previous estimates of the number of jobs added in May and June by 14,000.

If the pace of hiring keeps up, the unemployment rate will fall below 5 percent for the first time since 2008, according to Joseph LaVorgna, chief U.S. economist at Deutsche Bank. That would mean the labor market is operating beyond what economists consider full employment, raising the risk of higher inflation.

“This is probably the primary reason that Fed policymakers want to act on interest rates this year,” LaVorgna wrote in a research note. However, he noted that “there is still little evidence of any wage pressure.”

The most important thing about the jobs report that will be released Friday probably isn't what it says about the past, but about the future.

The October jobs figures will provide a critical hint to the Federal Reserve as it weighs the momentous decision of whether to raise interest rates at its December meeting.

The nation’s central bank is charged with two goals: to ensure maximum employment and price stability. And its track record since the Great Recession hasn’t looked too good. Millions of people lost their jobs, sending the unemployment rate soaring to 10 percent.

In response, the Fed unleashed an unprecedented amount of stimulus: It slashed its target interest rate – its main tool for steering the economy – to zero. It also pumped trillions of dollars into the recovery in hopes of spurring faster growth.

Now, seven years after the crisis, the unemployment rate has fallen by half. The numbers of long-term jobless and discouraged workers are also dropping. In congressional testimony Wednesday, Fed Chair Janet Yellen said she thought the economy was performing well.

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That means for the first time in nearly a decade the central bank is considering raising its target rate. Investors see a 50-50 chance that the Fed will move in December.

“Our statement indicates that December would be a live possibility, but importantly, that we have made no decision about it,” Yellen said Wednesday.

What could tip the balance? Friday’s snapshot of the health of the job market, for starters. Analysts expect the economy will add about 185,000 jobs. If the number falls short of expectations, the likelihood of moving in December gets more dicey.

Job growth already slowed over the summer, and another weak showing would help confirm that trend. There is only one more jobs report after Friday and before the Fed’s meeting at the end of the year -- and it may not be enough evidence to convince the central bank of a turnaround.

But if Friday’s number hits in the ballpark of analyst estimates, it could give the Fed confidence that it is moving closer not only to meeting its goal of maximum employment, but also its directive for price stability.

That’s because the two missions are deeply connected. Economics 101 says that as unemployment falls, the economy grows and inflation rises. For the Fed, that means the way to reach its target of 2 percent inflation is by pushing down the unemployment rate.

Of course, there’s a catch. The economy hasn’t been behaving according to textbook models. The unemployment rate is closing in on what many economists believe is the lowest level possible before inflation starts to rise. But there has been little evidence of price increases. In fact, inflation has been running essentially flat all year.

Some officials at the Fed want more evidence that inflation is actually picking up before raising rates – a “whites of the eyes” approach. But Yellen reiterated this week that she believes starting earlier will allow the Fed to make additional rate hikes more slowly. If inflation failed to materialize, the central bank could change course, she said.

“If we were to move, we would need to verify over time that expectation was being realized, and if not, to just adjust policy appropriately,” Yellen said Wednesday.

The jobs report certainly isn't the only piece of data the Fed will be considering. But it could set the tone for the debate into December.

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Companies have found something to give their employees other than raises

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The U.S. economy finished the year with a red-hot hiring spree, adding 292,000 new jobs as the unemployment rate held steady at 5 percent, according to new government data released Friday morning.

The latest jobs report exceeded the expectations of economists and investors and provided a reassuring note about the resiliency of the labor market, even amid volatile oil prices, a major slowdown in China and modest overall growth at home.

In all, the nation added 2.65 million jobs in 2015, the second-best year for hiring since 1999 and one that improved markedly in the last quarter. The economy added an average of 284,000 new monthly positions between October and December; in the first three-quarters of the year, the monthly pace was 200,000. Wage growth remains tepid, but the unemployment rate stands at its lowest point in more than seven years.

“The job market is not fully healed, but we’re getting much closer to where we’d like to be,” said David Berson, a chief economist at Nationwide Insurance.

In a sign of confidence in the economy, the Federal Reserve in December raised interest rates for the first time in nearly a decade, removing the easy terms of borrowing that had helped stimulate the economy. The Fed’s 10-member voting committee said in meeting minutes released this week that the labor market, though still shy of its full potential, showed “further improvement” and “confirmed that underutilization of labor resources had diminished appreciably since early this year.”

Still, there are signs from farther afield that are causing concern among economists and investors. New information about a Chinese economic slowdown, coupled with Beijing’s currency devaluation, this week caused a route in global markets. The Dow Jones Industrial average tumbled more than 5 percent in the first four days of trading this week, but in the opening minutes on Friday bumped up about 75 points, or roughly 0.5 percent.

The jobs data from December showed a labor market that is steadily growing but providing only modest wage gains to employees. Last month the average hourly wage fell by a penny, to $25.24. Since one year ago, wages are up 2.5 percent — below the pace from before the Great Recession, but a tick above the crawling pace maintained throughout much of the recovery. If there’s any consolation, it stems from lower oil prices, which have helped to push down the inflation rate while increasing the purchasing power for consumers.

The issue of stagnant wages has puzzled economists and policymakers, particularly as unemployment has hit a level that normally brings about greater competition among employers — and forces them to offer salary increases. Some economists say that a massive shadow workforce still lingers on the sideline, a group that is not currently looking for jobs and not counted in unemployment figures. The share of Americans holding jobs or looking for work has fallen steadily for 15 years, and in December the so-called labor force participation rate was little changed, at 62.6 percent.

As part of the data released Friday, the government also revised upward jobs estimates for October and November by a combined 50,000 positions. The November, previously estimated at 211,000, was revised to 252,000.

In December, job creation was particularly strong in construction and health care. But the mining sector — pressured by oil prices that are at their lowest point in 11 years — again contracted sharply. Over the last year, 130,000 Americans in the mining industry have lost jobs, according to government data. That offsets most of the gains made in the previous four years of the domestic drilling boom.

Going forward, the question is whether the American economy can endure in the face of a strong dollar and slowing global demand. The United States is largely driven by domestic consumption, insulating the economy from drastic bumps. But slumping growth oversees could bruise U.S. exporters and limit their hiring. Continued stock market volatility could also influence the way consumers view the economy and cause them to be more cautious about spending.

Labor Secretary Thomas Perez said Friday in an interview that the pace of hiring in 2015 lagged behind that of 2014 in part because of “global headwinds — the strong dollar and the fact that Europe and the rest of the world are not recovering as fast as we are. “

“If you’re Caterpillar or Boeing or an auto company — these companies that ship globally — this dampens your bottom line,” Perez said. “But the U.S. economy is incredibly resilient. When we have money in people’s pockets, when we continue to see consumer confidence at solid levels, when we continue to see job openings, these are all indicators or an economy that has the ability to withstand these global headwinds.”

If the U.S. continues to add jobs at steady pace in January and February, investors believe the Federal Reserve could call for another interest rate hike at its meeting in March. The central bank is trying to gradually return interest rates to a more normal footing following a seven years of near-zero rates — an extraordinary period designed to stimulate the economy in the aftermath of the crisis. Fed officials expect that interest rates will rise by about 1 percent this year, implying rate hikes of a quarter percentage point at four of their meetings this year.

For Fed committee members, the latest jobs news will “bolster their case for four rate hikes this year,” said Beth Ann Bovino, a chief economist at Standard & Poor’s.