U.S. Unemployment Falls to 8.5% as Jobs Gain
Payroll growth in the U.S. beat forecasts in December and the unemployment rate dropped to the lowest level in almost three years as the economy gained strength heading into 2012.
The 200,000 increase followed a revised 100,000 gain in November that was smaller than first estimated, Labor Department figures showed today in Washington. The jobless rate unexpectedly fell to 8.5 percent, while hours worked and earnings climbed.
“You got the trifecta -- more people working, wages up and the average work week up,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, who accurately forecast the December payrolls gain. “You can’t really argue that that isn’t a sign of significant improvement in the job market.”
Sustained hiring is needed to support the household spending that accounts for about 70 percent of the world’s largest economy. Today’s report follows gains in manufacturing (NAPMPMI) and consumer sentiment (CONCCONF) that suggest the U.S. is withstanding the economic crisis in Europe.
Stocks and Treasury yields fell after William C. Dudley, president of the Federal Reserve Bank of New York, said the outlook for unemployment remains “unacceptably high” relative to the Fed’s goals. The Standard & Poor’s 500 Index declined 0.3 percent to 1,277.77 at 1:15 p.m. in New York. The yield on the 10-year Treasury note fell to 1.96 percent from 2 percent late yesterday.
Payrolls were forecast to rise by 155,000 in December, according to the median estimate in a Bloomberg News survey of economists. Regular monthly revisions subtracted a total of 8,000 jobs from payrolls in October and November.
The unemployment rate, derived from a separate survey of households, was forecast to climb to 8.7 percent from a previously reported 8.6 percent in November. The November rate was revised to 8.7 percent.
Private hiring, which excludes government agencies, rose 212,000 after a revised gain of 120,000 in November. It was projected to climb by 178,000, the survey showed.
Retail trade payrolls climbed 27,900 as companies kept hiring for the holiday shopping season. Among companies planning to take on more staff as consumer demand strengthens is Fort Worth, Texas-based Pier 1 Imports Inc. (PIR)
“Sales are robust, merchandise margins are strong, operating margins are growing,” Chief Executive Officer Alexander Smith said on a Dec. 15 conference call with analysts. “There’s going to be a little more hiring in the first part of the year without a doubt.”
President Barack Obama said the jobs report shows the economy is healing, and he appealed to lawmakers to extend a payroll-tax cut through the rest of the year to assure growth continues.
“We’re starting to rebound,” Obama said at the offices of the Consumer Financial Protection Bureau in Washington. “We’re creating jobs on a consistent basis.”
Employment at service providers increased 152,000, with a 50,200 advance in the transportation industry. United Parcel Service Inc. (UPS) said in November that it planned to hire 55,000 holiday workers this year, a 10 percent increase from 2010, to help with shipping gains tied to online shopping.
Last month’s gain in transportation jobs was the biggest since September 1997. In December 2010, a 50,100 gain in the industry’s payrolls was almost entirely reversed a month later.
Payroll increases got “some help from temporary factors,” which also included milder weather that probably boosted hiring by construction companies, Bruce Kasman, chief economist for JPMorgan Chase & Co. in New York, said on a conference call. Builders added 17,000 workers last month.
Other companies also saw increased demand during the holidays. Same-store sales at U.S. retailers excluding Wal-Mart Stores Inc. rose 3.5 percent in December from a year earlier, according to figures yesterday from the International Council of Shopping Centers.
In the final three months of 2011, “clear signs emerged that U.S. consumers are more confident and that other underpinnings of our economy are either stable or slowly improving,” Don Johnson, vice president of U.S. sales for Detroit-based General Motors Co. (GM), said on a Jan. 4 conference call.
Factory payrolls (USMMMNCH) increased by 23,000, the strongest since July, after a 1,000 gain in the previous month. Manufacturing job growth last year was the strongest since 1997.
Gains among private employers were partly offset by cuts in government payrolls, which decreased by 12,000 in December.
For all of 2011, employers added 1.64 million workers, the best year for the American worker since 2006, after a 940,000 increase in 2010. Even with the gains, little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009.
“The tide is beginning to come back in,” James Glassman, senior economist at JP Morgan Chase in New York, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “We’ve got a long way to go. This is all positive, though, that we’re actually moving forward, and that’s an important trend.”
The New York Fed’s Dudley, in a speech today to bankers in Iselin, New Jersey, said the central bank still needs to consider monetary-policy easing.
“Because the outlook for unemployment is unacceptably high relative to our dual mandate and the outlook for inflation is moderate, I believe it is also appropriate to continue to evaluate whether we could provide additional accommodation in a manner that produces more benefits than costs,” Dudley said.
Average hourly earnings rose 0.2 percent to $23.24, today’s report showed. The average workweek for all workers increased six minutes to 34.4 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 15.2 percent from 15.6 percent.
Annual benchmark revisions to the household survey showed the unemployment rate averaged 8.9 percent in 2011, down from 9.6 percent and 9.3 percent in the previous two years. It still marked the worst three-year period since 1939 to 1941.
The report also showed a decrease in long-term unemployed Americans. The number of people unemployed for 27 weeks or more fell as a percentage of all jobless, to 42.5 percent from 43.1 percent.
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