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Forget about ambiguity. The October jobs report left little doubt the U.S. labor market is back with a vengeance after a two-month lull.

The 271,000 gain in payrolls was the biggest this year and exceeded all estimates in a Bloomberg survey of economists, a Labor Department report showed Friday. The jobless rate fell to a seven-year low of 5 percent and average hourly earnings over the past 12 months climbed by the most since 2009.

Lowest in more than seven years

Treasuries tumbled and the dollar strengthened as the report allayed concerns of a hiring slowdown after weaker payrolls advances cooled in August and September. Such improvement will probably mean a green light for Fed officials, who last month held out the possibility of a December rate increase.

“It’s a solid labor market,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York and a former economist at the Fed. “The report is pretty good across the board. December is now a very high likelihood for the Fed to hike rates.”

Investors have raised to about 70 percent the probability of a rate increase by policy makers’ December meeting, according to pricing in the federal funds futures market. That compares to 56 percent on Thursday, and assumes the effective funds rate averages 0.375 percent after liftoff.

The report also showed diminishing labor-market slack. The number of Americans working part-time because of a weak economy fell to 5.7 million in October, the lowest since June 2008.

Survey Results

The median forecast called for a 185,000 advance in payrolls. Estimates of 75 economists in the Bloomberg survey ranged from gains of 75,000 to 250,000. Revisions to prior reports added a total of 12,000 jobs to the August and September readings. Still, employment only averaged 145,000 those months.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 1.1 percent at 11:50 a.m. in New York. The yield on the benchmark 10-year Treasury climbed 10 basis points, or 0.1 percentage point, to 2.33 percent.

The unemployment rate, which is derived from a separate Labor Department survey of households, is the lowest since April 2008.

Employment in October was led by the biggest gain in retail payrolls since November, the strongest hiring in construction in eight months and a pickup at temporary-help agencies. There was no change at the nation’s manufacturers.

Average hourly earnings rose by 0.4 percent from the prior month. Worker pay increased 2.5 percent over the 12 months ended in October, the most in more than six years, following a 2.3 percent gain the prior month. They had been stuck around near 2 percent on average since the current expansion began in mid-2009.

12-month gain in hourly pay biggest since July 2009

The underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want to work but have given up looking -- fell to 9.8 percent, the lowest since May 2008.

In addition to growth in payrolls and wages, “we’re also seeing a number of other important bellwethers of progress,” Labor Secretary Tom Perez said in a phone interview. “We’re continuing to have the wind at our backs.”

The participation rate, which shows the share of working-age people in the labor force, held at 62.4 percent.

Fed officials said last month that they’d consider a rate increase at their next gathering, and Fed Chair Janet Yellen this week echoed the view by saying December was a “live possibility.” One of the central bank’s preconditions for liftoff is “some further improvement” in the labor market. It next meets on Dec. 15-16, and an increase in the benchmark rate would be the first since 2006. It’s been near zero since December 2008.

American manufacturing has taken a hit with softening sales in overseas markets, a stronger dollar and oil-sector weakness depressing demand. Services, which account for about 90 percent of the economy, are relatively shielded and faring better.

— With assistance by Chris Middleton

(Updates with Labor secretary's comment in 13th paragraph.)