Dec. 3 (Bloomberg) -- Employers added fewer jobs than forecast in November and the unemployment rate rose to 9.8 percent, pointing to economic weakness that’s likely to keep the Federal Reserve pumping money into the financial system.
Payrolls increased 39,000, less than the most pessimistic projection of economists surveyed by Bloomberg News, after a revised 172,000 increase the prior month, Labor Department figures showed today in Washington. The jobless rate rose to a seven-month high, while hours worked and earnings stagnated.
Two-year Treasury securities climbed and the dollar weakened as the data contradicted recent reports showing manufacturing growth and stronger holiday sales. The unexpected gain in unemployment is likely to intensify political debate over extending Bush-era tax cuts, as well as the Fed’s $600 billion program of asset purchases intended to spur growth.
“We haven’t gotten the pace of job growth to an acceptable level,” Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York, said in an interview. “This is the kind of report that validates the Fed doing what they are doing.”
The 2-year Treasury note rose, pushing the yield down to 0.47 percent at 4:33 p.m. in New York from 0.54 percent late yesterday. Stocks ended higher, extending the biggest weekly gain in a month, propelled by a rally in shares of energy and metal producers as commodity prices rose. The Standard & Poor’s 500 Index advanced 0.3 percent to 1,224.71 at the 4 p.m. close in New York.
Another report showed service industries expanded in November at the fastest pace in six months.
Payrolls were forecast to climb by 150,000, according to the median forecast in a Bloomberg survey of 87 economists. The October figure was revised up from an initially reported gain of 151,000. The jobless rate was forecast to hold at 9.6 percent.
The number of unemployed Americans rose to 15.1 million last month, including a record 6.4 million women.
Among companies cutting jobs is Boston-based State Street Corp., the third-largest custody bank, which on Nov. 30 said it will eliminate 1,400 positions, or about 5 percent of its workforce, to reduce costs as interest rates near zero erode profit.
“Amid the current challenging economic conditions, we will continue to improve our operating environment in the short-term while ensuring that we have the right structure in place for long-term growth,” Chief Executive Officer Joseph “Jay” Hooley said in a statement.
Financial firms cut 9,000 jobs last month, the most in four months, today’s report showed. Construction companies subtracted 5,000 workers and payrolls at retailers fell 28,100.
Private payrolls that exclude government agencies also gained less than forecast, rising by 50,000 in November. Economists projected a 160,000 gain, the survey showed.
The U.S. Senate is scheduled to vote tomorrow on Democratic proposals to extend a portion of the Bush-era tax cuts before they expire at the end of the month, Senate Majority Leader Harry Reid said.
“It’s critically important that we extend tax cuts to the middle class, the Bush tax cuts and the Obama tax cuts, and that we not pull the rug out from under the unemployed that are searching for work, and we extend the unemployment benefits,” Austan Goolsbee, chairman of President Barack Obama’s Council of Economic Advisers, said in an interview with Bloomberg Television.
Republicans have vowed to block any measure that doesn’t extend all of the Bush-era tax policies, saying that expiration of the lower rates for upper-income taxpayers would hurt job creation.
“Raising taxes during times of economic uncertainty and instability is the wrong thing to do,” Senator Orrin Hatch, a Republican from Utah, said in a statement.
In an effort to reach out to some of the nation’s largest employers, Obama met with Wal-Mart Stores Inc. Chief Executive Officer Mike Duke at the White House on Nov. 29. The meeting is one of a series of sessions aimed at soliciting the views of companies, with the goal of spurring the recovery and adding jobs.
Employment at service-providers increased 54,000, today’s Labor Department report showed. Separately, the Institute for Supply Management said today its non-manufacturing index, which covers about 90 percent of the economy, rose to 55 last month from 54.3 in October. A reading higher than 50 signals growth.
Manufacturing payrolls dropped by 13,000 in November, the most in three months, today’s Labor Department report showed. Economists had projected an increase of 5,000. State and local governments reduced employment by 13,000.
New York City, facing a $3.3 billion deficit in next year’s budget, will cut its workforce by more than 10,000 over the next year-and-a-half, Mayor Michael Bloomberg’s budget office said Nov. 18. More than 6,200 workers will be fired, and the remainder of the cuts will be made through attrition, his office said.
The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.
Today’s Labor Department report showed the number of temporary workers rose 39,500, indicating companies are holding off hiring full-time employees.
“Our clients still are looking for flexibility because there’s enough uncertainty in the pace of the recovery,” Tig Gilliam, chief executive officer of Adecco North America, said in an interview. The Melville, New York, firm is a division of Glattbrugg, Switzerland-based Adecco SA, the world’s largest supplier of temporary workers.
Average hourly earnings were $22.75 in November compared with $22.74 in the prior month, today’s report showed. The average work week for all workers held at 34.3 hours.
The so-called underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking -- held at 17 percent.
“The labor market is capping off a very poor recovery this year,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “I don’t think we’ll slide back into job losses, but being stuck in neutral isn’t good. While consumer spending has normalized, employers are uncertain about demand going into 2011.”
The report also showed the number of people unemployed for 27 weeks or more increased as a percentage of all jobless, to 41.9 percent, the highest since August.
“It is really ugly right now,” said Anthony Johnson, 27, of Atlanta, who has been looking for a job since leaving the Marine Corps, where he was a warehouse clerk, 14 months ago. “It is so competitive. For every few jobs that come out, so many people are fighting for that one position.”
Johnson, who has a business degree, says he has put in more than 100 applications this year and had one interview for a job that was later filled internally. Some employers say he’s overqualified, he said.
One reason why hiring isn’t gaining speed is the economy’s inability to match the recovery’s earlier pace of growth. Gross domestic product expanded at a 2.5 percent annual rate in the third quarter, half the pace in the last three months of 2009.
Fed policy makers last month began buying Treasury securities as part of a plan to pump as much as $600 billion into the financial system through June with purchases of Treasuries.
Chairman Ben S. Bernanke has been among those saying the recovery has been too slow, keeping unemployment too high and leading to a deceleration in inflation that raises the risk of deflation, or sustained and damaging price decreases.
“Fed officials will certainly agree to continue their asset purchases at the upcoming Dec. 14 meeting,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “In fact, one wonders if they increase the pace of purchases.”
John Boehner, the presumptive House speaker, and three other Republican leaders have criticized the Fed’s asset-purchase plan, announced a day after the Nov. 2 elections, saying it risked weakening the dollar and fueling asset bubbles.
Recent economic data had pointed to an accelerating recovery. Household purchases climbed in October for a fourth straight month and incomes rose more than forecast, according to a Commerce Department report last week. Applications for jobless benefits fell in November to the lowest in more than two years, the Labor Department said yesterday.
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