Jobless rate falls to over 2-year low of 8.6%
Unemployment at lowest level since 2009 as labor force shrinks
WASHINGTON (MarketWatch) — The U.S. economy created 120,000 jobs in November and the unemployment rate fell to 8.6%, its lowest level in more than two and a half years, the Labor Department said Friday.
The big drop in the jobless rate, which stood at 9.0% in October, stemmed mainly from a decline in the size of the labor force. Some 315,000 people stopped looking for jobs last month, which is usually not a good sign.
Yet the decline in the labor force is belied by other evidence showing that companies continue to add workers at a modest pace. The increase in hiring in November was accompanied by revisions in the October and September data that show an additional 72,000 jobs were created.
What’s more, the labor force had increased by nearly 1 million people in the three months before November, suggesting that more jobs are available. People tend to reenter the labor force when they think they have a better chance of finding a job.
The latest employment report adds to a growing pile of data showing that the economy continues to strengthen after a early-summer letdown.
The economy has gained an average of 131,000 jobs over the past year, or an even higher 143,000 in the past three months. The employment figures are drawn for a survey of several hundred thousand business establishments.
“It was a better-than-expected report and continues the steady diet of positive data we’ve seen over the past few months,” said economist Neil Dutta of Bank of America/Merrill Lynch.
Investors reacted positively to the report. The Dow Jones industrial average jumped as much as 125 points to extend a recent rally. Read Market Snapshot.
The White House was also cheered by the news. Alan Krueger, president Obama’s chief economist, said the report shows that the economy remains on a “positive trajectory,” though he added that the White House would like to see the U.S. “recover more quickly.” Read reaction to jobs report.
The number of new jobs created, however, fell well short of what economists say is necessary to drive down the nation’s jobless rate, which had hovered around 9% since the beginning of 2011. The U.S. would need to add about 250,000 jobs a month for several years to bring the unemployment rate back down to its pre-recession level of about 6%.
“It was nice to see the unemployment rate come down but if we are to see it continue to fall, firms will have to hire a lot more people than they did in November,” said Joel Naroff of Naroff Economic Advisors.
Economists surveyed by MarketWatch predicted a seasonally adjusted increase of 125,000 jobs, though some were forecasting as much as 175,000. No change was expected in the unemployment rate.
Retailers lead the way
The increase in hiring took place entirely in the private sector, with employment rising by 140,000.
Governments cut 20,000 jobs last month to put the total loss over the past two years at around 600,000. States and municipalities have been forced to reduce staff to balance their budgets as required by local law.
Hiring in October was revised up to 100,000 from 80,000 and the job gains in September were revised up to 210,00 from 158,000, — the highest number since April.
The retail sector posted the biggest increase in jobs as stores hired 50,000 employees, perhaps because Thanksgiving took place earlier than usual. Retailers always ramp up hiring before the holiday season begins.
In addition, the leisure and hospitality trade added 22,000 jobs, professional and business services gained 33,000 jobs and health care boosted hiring by 17,000.
The manufacturing and construction trades showed little change in employment.
Government data also showed that wages and hours worked were little changed in November. Hourly earnings fell by 2 cents to $23.18 and the average workweek was unchanged at 34.3 hours.
The MarketWatch survey expected a 0.2% increase in average hourly earnings.
While hourly earnings have risen 1.8% over the past 12 months, inflation was twice as high at 3.5% during the same span based on the consumer price index. The result: a declining standard of living for millions of Americans.
Some economists question whether the current trajectory of employment is sustainable absent a faster increase in wages or a sharp reversal in inflation. As much as 70% of economic activity is generated by consumer spending, but Americans still have high debts and more than 13.3 million people remain without work.
An alternative measure of unemployment puts the jobless rate much higher. The so-called U6 rate, which includes part-time workers and those who recently stopped looking for work, stood at 15.6% last month. It fell from 16.2% in October, however.
Another part of the Labor Department report offers more optimism, though. The household survey, used to calculate the jobless rate, posted another big increase in the number of people who say they found jobs: 278,000. That follows gains of 277,000 in October and 398,000 in September.
Although the household survey is not as accurate month to month as the Labor Department’s business survey, it’s often a good forward indicator of hiring trends. The household data captures the situation of workers who are undetected by traditional survey methods.
The U.S. economy has a long way to go, however, to get back to where it was before the 2007-2009 recession struck. The economy has 6 million fewer jobs now compared to November 2007.
As of last month, 5.7 million people have been without a job for more than six months. And the average length of unemployment rose to a record 40.9 weeks.