The U.S. labor market withstood the impact of superstorm Sandy as job growth exceeded forecasts in November and the unemployment rate declined to the lowest since December 2008.
Employment climbed by 146,000 following a revised 138,000 increase in October that was less than initially estimated, Labor Department figures showed today in Washington. The median forecast of 91 economists surveyed by Bloomberg called for a gain of 85,000. The unemployment rate fell to 7.7 percent as the labor force shrank.
The improvement in hiring bodes well for the holiday shopping season and indicates Americans will keep up the spending that makes up 70 percent of gross domestic product. Coupled with improvements in housing, the report indicates the economy will be better placed to weather federal budget cuts and tax increases that may occur next year even if lawmakers agree on reducing long-term budget deficits.
“There is some decent momentum in the economy now, which we’re going to need coming into next year when one way or another there is some amount of fiscal drag,” said Jerry Webman, chief economist at New York-based OppenheimerFunds Inc., which has $186 billion in assets under management. “This is modestly encouraging.”
Stocks rose for a third day as optimism over the jobs data overshadowed a drop in confidence. The Standard & Poor’s 500 Index climbed 0.3 percent to 1,418.07 at the close in New York. The yield on the 10-year Treasury note rose to 1.63 percent from 1.59 percent late yesterday.
Another report today showed confidence among consumers fell more than forecast in December as Americans’ expectations slumped to a one-year low. The Thomson Reuters/University of Michigan preliminary consumer sentiment index decreased to 74.5, the weakest in four months, from 82.7 in November. Economists projected a reading of 82, according to the median estimate in a Bloomberg survey.
Estimates for the increase in November payrolls ranged from 15,000 to 145,000 after a previously reported 171,000 gain in October. The revision for October reflected a 51,000 drop in government jobs.
Private payrolls, which exclude government agencies, rose 147,000 in November. They were projected to rise by 90,000, the survey showed.
An early Thanksgiving may have boosted payrolls by about 75,000 last month, according to projections by UBS Securities LLC, as companies such as retailers took on extra staff sooner than normal.
Businesses that stepped up holiday hiring include Macy’s Inc. The second-biggest U.S. department-store chain said it would add about 2,000 more seasonal workers than the 78,000 it hired last year. Toys ‘R’ Us Inc., the world’s largest toy retailer, reported plans to employ 45,000 temporary staff, up 5,000 from the 2011 season.
A rebound in housing is boosting sales at furniture makers, some of which are adding workers to keep up with demand.
“We have a sense of much more positive momentum heading into next year than we did at this time last year,” Alan Cole, president of Martinsville, Virginia-based Hooker Furniture Corp., said on a Dec. 5 conference call with analysts. “We’ve expanded our workforce by about 5 percent to date and anticipate another 5 percent expansion in the coming months.”
Valerie Epps of Atlanta, who lost a part-time retail job in November, said she is “optimistic” she can return to her prior career in real estate and insurance now that the housing market is improving in the area.
“In the past, the market wasn’t very good in real estate or insurance, and they are so tied together,” said Epps, 45. “It’s all now building back up. You can see a turnaround. I do see companies hiring, slowly.”
The administration of President Barack Obama used the report to push for an extension of tax cuts for middle-income Americans as well as a program to help homeowners refinance their mortgages.
“It is critical that we continue the policies that are building an economy that works for the middle class,” Alan Krueger, chairman of Obama’s Council of Economic Advisers, said in a statement.
Obama is also pushing for higher tax rates for the top 2 percent of earners, a proposal Republicans reject while pressing for deeper cuts in social programs. Failure to come to an agreement would mean more than $600 billion in tax increases and spending cuts take effect automatically next year.
Economists were forecasting the jobs report would show Sandy depressed payrolls. Before today’s numbers, Nomura Securities International Inc. projected the storm would reduce payrolls by 45,000, while UBS Securities LLC and Deutsche Bank Securities Inc. put the fallout at 150,000.
While the Labor Department said Sandy didn’t “substantively impact” the data, its poll of households showed that 369,000 people were not at work because of bad weather during the survey week. The average of the last 10 Novembers was 70,000 in the survey, which is used to calculate the jobless rate.
The storm left about 8 million homes and businesses without power for days after making landfall in New Jersey on Oct. 29. The 26 counties designated as major disaster areas after the storm had an average 1,301 labor force participants per square mile, about 30 times the average labor force density for the U.S. in 2011, according to the Labor Department.
Rafael Landi, 47, lost his job in Jersey City, New Jersey as an executive chef and general manager of Surf City, a waterfront restaurant that was demolished by the storm.
“It’s a complete loss because the place was entirely made of wood,” Landi said of the restaurant, which faced Liberty Harbor. “That whole area was just completely destroyed.” Landi said he is working part-time as he looks for a full-time job.
A rebound in auto purchases after Sandy signals carmakers and dealers may continue to boost employment. Industry sales of cars and light trucks rose to 15.5 million at an annual rate in November, the best pace since February 2008, according to Ward’s Automotive Group.
Today’s report showed a decline in the share of working-age people in the labor force, helping explain why the unemployment rate dropped. The so-called participation rate fell to 63.6 percent from 63.8 percent in the prior month.
The unemployment rate in November was forecast to stay at 7.9 percent, according to the survey median.
Among industries, factory payrolls decreased by 7,000 in November as job losses in food manufacturing and chemicals more than offset gains at automakers. Employment at construction companies dropped by 20,000 workers and increased by 169,000 at private service-providers.
Citigroup Inc. is among companies cutting back. The New York-based bank announced this week it will eliminate more than 11,000 jobs and pull back from some emerging markets to drive down costs as revenue dries up.
Some companies say hiring and investment are being held back on concern growth is cooling globally and U.S. lawmakers will fail to reach agreement on reducing the budget deficit.
“We’re expecting the same sort of a slow-growth environment, that’s our best view of 2013,” Fredrik Eliasson, chief financial officer of CSX Corp., the largest eastern U.S. railroad, said on a Nov. 28 teleconference with analysts. “There are a lot of uncertainties out there in the world at this point between what’s going on here with the fiscal cliff and between Europe and China.”
Federal Reserve officials meeting next week are considering whether to step up easing to stimulate the economy and trim the jobless rate.
“Although the economy continues to expand, we must grow faster if we are to put all of our jobless workers and idle businesses back to work,” William C. Dudley, president of the Federal Reserve Bank of New York, said in a Nov. 29 speech. He called the unemployment rate “unacceptably high.”