U.S. Economy: Unemployment Rate Unexpectedly Falls to 8.9%
The U.S. jobless rate unexpectedly fell to 8.9 percent in February, the lowest in almost two years, and employers added 192,000 jobs in a sign of growing confidence in the recovery.
The increase in payrolls partly reflected a return to more seasonable weather and followed a 63,000 gain in January, Labor Department figures showed today in Washington. The median estimate in a Bloomberg News survey of economists was for an addition of 196,000 jobs last month.
Manufacturing, construction and transportation were among industries adding workers, underscoring Federal Reserve Chairman Ben S. Bernanke’s testimony to Congress this week that there are “grounds for optimism” about improvements in the labor market. Employment growth is giving Americans the means to keep spending at retailers such as J.C. Penney Co. and Macy’s Inc. (M)
“The economy has been clawing its way back up the side of the mountain for the better part of a year and these numbers are consistent with that,” Paul O’Neill, a special adviser to the New York-based Blackstone Group LP and a former Treasury Secretary, said in an interview with Bloomberg Television. “Where we are is the process of natural healing of our economy.”
The Standard & Poor’s 500 Index fell 0.7 percent to 1,321.15 at 4 p.m. in New York on concern wage gains may not keep up with rising energy prices. The yield on the benchmark 10-year Treasury note fell to 3.49 percent from 3.56 percent late yesterday.
The unemployment rate was projected to rise to 9.1 percent from 9 percent, according to the survey median. The number of unemployed fell by 190,000, and those employed rose by 250,000. The size of the labor force increased by 60,000.
President Barack Obama last week told the first meeting of his panel of outside economic advisers that the U.S. must deal with stubbornly high unemployment even as the recovery is well under way.
“We still have a ways to go,” Labor Secretary Hilda Solis said in an interview today with Bloomberg Television. “We still have a lot of people who need jobs.”
Last month’s increase in payrolls was the biggest since May. If sustained, that pace would reduce the unemployment rate to 6.9 percent by November 2012, when Obama faces re-election, said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. The rate was 7.8 percent when Obama took office in January 2009.
The labor market “has improved only slowly,” and it may take “several years” for the unemployment rate to reach a “more normal level,” Bernanke said March 1 during testimony before the Senate Banking Committee.
Still, “we do see some grounds for optimism about the job market over the next few quarters, including notable declines in the unemployment rate in December and January, a drop in new claims for unemployment insurance, and an improvement in firms’ hiring plans,” Bernanke said.
Payroll estimates in a Bloomberg survey of 84 economists ranged from gains of 100,000 to 297,000. January employment was revised up from an initially reported gain of 36,000, while December payrolls increased 152,000 after a previously reported 121,000 rise.
Private hiring, which excludes government agencies, rose by 222,000 in February, exceeding the 200,000 median forecast in the Bloomberg survey. Private payroll gains averaged 145,000 during the first two months of the year, compared with 120,000 during the last half of 2010.
Government payrolls decreased by 30,000 last month, reflecting cuts at the state and local level. Federal government employment was unchanged.
Factory payrolls increased by 33,000, exceeding the survey forecast of a 25,000 gain. A measure of the share of industries showing job gains last month rose to 68.2, the highest since May 1998.
Orders to U.S. factories climbed in January by the most in more than four years as demand for commercial aircraft rebounded after slumping the previous month. Bookings for manufacturers’ goods rose 3.1 percent, the biggest gain since September 2006, after a revised 1.4 percent increase in December, the Commerce Department said today.
J.C. Penney, Macy’s and Ross Stores Inc. (ROST) were among retailers yesterday reporting February same-store sales that topped analysts’ estimates. Purchases at stores open at least a year climbed 6.4 percent at J.C. Penney, 5.8 percent at Macy’s and 3 percent at Ross, company data showed.
“We are encouraged by our solid start to the year,” Michael Balmuth, chief executive officer of Pleasanton, California-based discounter Ross Stores, said in a statement. Even so, “the much more important March/April holiday selling period is still ahead.”
Employment at service-providers rose 122,000. Construction payrolls rose 33,000 and transportation and warehousing jobs increased by 22,000. Retail trade employment declined 8,100.
A return to more seasonable temperatures helped boost payrolls last month.
Nationwide, temperatures during the week of the February employment survey were near normal, except for the central and southern Great Plains, according to National Weather Service. Economists said a snowstorm that spread from the Midwest and the South to New England during the prior month’s survey week likely depressed January numbers as businesses temporarily closed.
Weather may have also skewed figures for average hourly earnings and the length of the workweek. Earnings averaged $22.87 an hour last month, little changed after a 0.4 percent jump in January. The average work week for all workers held at 34.2 hours.
“We believe that the workweek has been depressed by bad weather in recent months and the unchanged wage rate in February probably reflects a payback for an outsized gain” in January, David Greenlaw, chief financial economist at Morgan Stanley in New York, said in a note to clients.
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 -- decreased to 15.9 percent, the lowest since April 2009.
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