U.S. Jobless Rate Unexpectedly Declines to 8.6%
Job gains in the U.S. picked up last month and the unemployment rate unexpectedly fell to the lowest level since March 2009, a decline augmented by the departure of Americans from the labor force.
Payrolls climbed 120,000, after a revised 100,000 increase in October, with more than half the hiring coming from retailers and temporary help agencies, Labor Department figures showed today in Washington. The median estimate in a Bloomberg News survey called for a 125,000 gain. The jobless rate declined to 8.6 percent from 9 percent. Revisions to prior reports added a total of 72,000 jobs to payrolls in September and October.
“It’s good news, not great news,” said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts, whose forecast matched the survey median. “The labor market is gradually healing.”
The Obama administration used the data to push for an extension of a payroll-tax cut it says is needed to maintain the expansion and reduce the jobless rate further. At the same time, the report damped speculation that Federal Reserve policy makers meeting on Dec. 13 will embark on another round of large-scale asset purchases.
The Standard & Poor’s 500 Index (SPX) was little changed at 1,244.27 at 4 p.m. New York time, erasing an earlier gain of as much as 1.3 percent. The yield on the benchmark 10-year Treasury note fell to 2.03 percent from 2.09 percent late yesterday.
There are also signs Europe’s troubles may be starting to ease. A European proposal to channel central bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($270 billion) to fight the debt crisis, two people familiar with the negotiations said.
At a Nov. 29 meeting attended by European Central Bank President Mario Draghi, euro-area finance ministers gave the go- ahead for work on the plan, said the people, who declined to be named because the talks are at an early stage.
“We’re tightening our belts in terms of spending,” Michael White, chief executive officer of the largest U.S. satellite-TV provider, said in an interview last week. “We’ll cut back on overhead, hiring and programming.”
Among companies expanding payrolls is Boeing Co. (BA), the largest U.S. aircraft maker. The Chicago-based company is hiring about 100 machinists a week as it boosts production by about 60 percent over three years to whittle down a backlog that now stretches to nearly 4,000 aircraft.
The unemployment rate, derived from a separate survey of households, was forecast to hold at 9 percent. The decrease in the jobless rate reflected a 278,000 gain in employment at the same time 315,000 Americans left the labor force.
“You’d like to see the unemployment rate coming down when people are coming into the job market, not disappearing,” James Glassman, senior economist at JP Morgan Chase & Co. in New York, said in a radio interview on “Bloomberg Surveillance” with Tom Keene.
President Barack Obama said the drop in the jobless rate is a sign the recovery is getting stronger, and extending a cut in the payroll tax will provide more fuel for the economy.
“We need to keep that growth going,” Obama said after he and former President Bill Clinton toured a building in Washington to promote a government and private industry initiative to upgrade the energy efficiency of public and commercial buildings that the administration says will help create construction jobs.
Employment at service-providers increased 126,000 in November, including a 50,000 gain in retail trade as companies began hiring for the holiday shopping season. The number of temporary workers increased 22,300.
Macy’s Inc. (M), the second-biggest U.S. department-store chain, increased mostly part-time staff by 4 percent for the November-December shopping season. See’s Candies Inc., a chocolate maker owned by Berkshire Hathaway Inc., said it would add 5,500 mostly temporary workers.
Private hiring, which excludes government agencies, rose 140,000 after a revised gain of 117,000. Still, factory payroll growth slowed and construction employment dropped.
Government payrolls decreased by 20,000 in November, including a 16,000 decline on the state and local levels.
Limited Wage Gains
Even as payrolls grow, limited wage gains are restraining consumers’ ability to boost spending, which accounts for about 70 percent of the economy. Average hourly earnings fell 0.1 percent to $23.18, 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 -- decreased to 15.6 percent from 16.2 percent.
The report also showed an increase in long-term unemployed Americans. The number of people unemployed for 27 weeks or more increased as a percentage of all jobless, rose to 43 percent from 42.4 percent.
Fed Chairman Ben S. Bernanke and his colleagues last month cut economic growth forecasts for 2012 and said unemployment will average 8.5 percent to 8.7 percent in the final three months of next year, up from a prior range of 7.8 percent to 8.2 percent.
Fed policy makers today offered differing interpretations of the decline in the unemployment rate.
“While the rate is certainly a very favorable rate, I would highlight that a lot of it is because people pulled out of the workforce,” Fed Bank of Boston President Eric Rosengren said in a speech. Rosengren said in a Nov. 16 speech that the central bank still has power to boost the economy through lower interest rates.
Charles Plosser, president of the Philadelphia Fed, said in a Bloomberg radio interview it’s a sign the “labor market is in fact healing.” Plosser has dissented twice this year against decisions to ease policy.
“Whether the swoon in the unemployment rate is legitimate or not, the doves on the Fed have just been sidelined from advocating QE3, at least for the next few months,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, referring to a third round of asset purchases.
Six central banks led by the Fed acted on Nov. 30 to make more funds available to lenders to preserve the global expansion. The move came after European leaders said they failed to boost the region’s bailout fund as much as planned, fueling concern about a possible breakup of the euro bloc.
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