U.S. employment barely grew in November and the jobless rate unexpectedly hit a seven-month high, hardening views the Federal Reserve would stick to its $600 billion plan to shore up the anemic recovery.

Nonfarm payrolls rose 39,000, with private hiring gaining only 50,000, just a third of what economists had expected, a Labor Department report showed on Friday. The unemployment rate jumped to 9.8 percent from 9.6 percent in October.

The weak report was a surprise given the relative strength of some other recent economic signals, including robust retail sales. Economists had expected 140,000 new jobs and a steady unemployment rate.

While the data raised a warning flag, many analysts cautioned against reading too much into it.

The report comes as an unwelcome bucket of cold water, said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. We're reluctant to take it at face value and suspect that it is an outlier -- on the downside -- but it does underline that the recovery remains a gradual one.

Stock market investors also appeared to be in disagreement with the weak hiring number, and U.S. shares closed marginally higher. Prices for long-dated U.S. government debt fell while the dollar dropped across the board.

A separate report from the Institute for Supply Management showed service sector activity rose in November, with a gauge of hiring reaching its highest level since October 2007, before the economy tumbled into recession.

Payrolls for September and October were revised to show 38,000 more jobs were gained in those months than previously estimated, taking some sting out of the report. Some economists said November's data was likely distorted by the way it was adjusted for seasonal fluctuations and said they expected a snap back in December.

CONFLICTING SIGNALS

Some of the areas of weakness were a bit surprising, said Zach Pandl, a U.S. economist at Nomura Securities International in New York. Manufacturing and retail sales seem to contradict other available evidence, and the services ISM is outpacing the growth we saw in services employment during the month.

One of the big surprises in November was the loss of 28,100 retail jobs despite signs of a busy holiday shopping season.

Adding to the mystery, data collected by workforce management firm Kronos showed retailers recorded 56,028 hirings on a seasonally adjusted basis in November, up 77.5 percent from October.

Economists said it was possible some last-minute hiring by retailers had not been captured in the Labor Department's survey of employers. It was also likely that many of the workers were being hired through staffing agencies, which would boost temporary help employment.

Temporary help services employment increased 39,500 last month, building on October's 34,700 gain.

We are stalled on the launch pad for now. Nevertheless, we remain convinced that we will see a transition into a self-sustaining economic expansion through 2011, said Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh.

The jobless rate jumped partly because the survey of households on which it is based showed discouraged workers rejoined the labor pool to look for jobs. However, that survey also showed a drop in employment.

Concerns about joblessness and low inflation led the Fed last month to launch its much-criticized government bond buying program to push already low interest rates down further.

This means that the Fed will complete its asset purchase program. Our sense is that the Fed will go once again when the initial round of purchases is done, said Neil Dutta, an economist at Bank of America Merrill Lynch in New York.

The U.S. central bank cut overnight interest rates to near zero in December 2007 and had already bought $1.7 trillion in mortgage-related and government debt. Traders in futures markets on Friday pushed expectations of an eventual increase in benchmark overnight rates out until mid-2012.

WEAKNESS ACROSS THE BOARD

A raft of recent data had raised optimism the economy was accelerating after hitting a soft patch in the summer. That soft patch helped Republicans wrest control of the House of Representatives from Democrats in November elections.

Unemployment is expected to remain painfully high for years, a problem for President Barack Obama, who will face reelection in 2012.

The White House said the report underscored the importance of extending tax cuts for middle-class Americans. Republicans said it supported their push to stop tax hikes on the wealthy.

The weak jobs report could give fresh impetus to efforts to secure a deal on Bush-era tax cuts that expire at year end. Expiry without offsetting stimulus elsewhere could deal a hard blow to the economy.

The report showed employment in November was weak across the board, with government payrolls contracting as local authorities continue to struggle with budget problems.

Payrolls in the goods-producing sector fell 15,000 as manufacturing jobs declined for a fourth straight month and construction reversed October's surprise gains.

Employment in the private service-providing sector rose 65,000 in November, with the weakness in the retail sector offset by strong hiring by professional and business services, and the gain in temporary employment.

(Editing by James Dalgleish)

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