By Lucia Mutikani

WASHINGTON (Reuters) - 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. While the data raised a warning flag, many analysts cautioned against reading too much into it.

"The November jobs report understates the improvement in the job market last month and still supports our baseline forecast of a sustained half-speed economic expansion," said Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh.

Economists had expected 140,000 new jobs last month with the jobless rate holding steady.

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.

Stock market investors also appeared to be in disagreement with the weak hiring number and U.S. shares were trading only marginally lower in afternoon trade. Prices for U.S. government debt rose, while the dollar fell against the yen.

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. Economists said November's data could also be adjusted higher.

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 was the loss of 28,100 retail jobs last month despite signs of a busy holiday shopping season.

Adding to the retail 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 increased 39,500 last month, building on October's 34,700 gain.

"We're reluctant to take this report at face value, but it does underline that the recovery remains a gradual one," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

In November, the jobless rate jumped partly because the survey of households on which it is based showed discouraged workers rejoined the labor force. However, that survey also showed a drop in employment.

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

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 overnight rates out until mid-2012.

"Fed officials will certainly agree to continue their asset purchases at the upcoming December 14 meeting. In fact one wonders if they will increase the pace of purchases," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

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 re-election in 2012.

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

Vice President Joe Biden huddled with Treasury Secretary Timothy Geithner and White House budget chief Jack Lew -- the administration's two top tax negotiators -- to talk strategy in the high-stakes showdown over Bush-era cuts set to expire at year-end.

The weak jobs report could give fresh impetus to get a deal done. Expiry of the tax cuts 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 Neil Stempleman)