Unemployment Falls to 7% on 203K Jobs Added
A fourth straight month of solid hiring cut the U.S. unemployment rate in November to a five-year low of 7 percent. The surprisingly robust job gain suggested that the economy may have begun to accelerate.
It also fueled speculation that the Federal Reserve will scale back its economic stimulus when it meets later this month.
Employers added 203,000 jobs last month after adding 200,000 in October, the Labor Department said Friday. November’s job gain helped lower the unemployment rate from 7.3 percent in October.
The economy has now generated a four-month average of 204,000 jobs from August through November. That’s up from 159,000 a month from April through July.
Evidence of a stronger job market cheered stock investors. The Dow Jones industrial average rose 112 points in mid-morning trading.
The strong report “gives the Fed all the evidence it needs to begin tapering its asset purchases at the next … meeting,” said Paul Ashworth, an economist at Capital Economics.
The unemployment rate has fallen nearly a full percentage point since the Fed began buying bonds in Sept. 2012 and hit 7 percent earlier than most analysts expected.
In June, Fed Chairman Ben Bernanke suggested that the Fed would end its purchases when the rate had reached 7 percent. Bernanke later backed away from that specific target in September, saying many measures will go into the decision.
Many economists still think the Fed won’t begin to cut back until its January meeting or later.
In addition to the total job growth and unemployment decline, the November employment report included some other encouraging signs:
— Higher-paying industries are adding more jobs. Manufacturers added 27,000 jobs, the most since March 2012. Construction companies added 17,000. The two industries have created a combined 113,000 jobs in the past four months.
— Average hourly wages rose 4 cents to $24.15. They have risen just 2 percent in the past year. But that’s ahead of inflation: consumer prices have risen 0.9 percent over that time.
— And employers used their existing staffs more: the average work week rose to 34.5 hours, up from 34.4. A rule of thumb among economists is that a one-tenth hourly increase in the work week is equivalent to adding 200,000 jobs.
Friday’s report follows other positive news. The economy expanded at an annual rate of 3.6 percent in the July-September quarter, the fastest growth since early 2012, though nearly half that gain came from businesses rebuilding stockpiles. Consumer spending grew at the slowest pace since late 2009.
Greater hiring could support healthier spending. Job growth has a dominant influence over much of the economy. If hiring continues at its current pace, a virtuous cycle will start to build: More jobs typically lead to higher wages, more spending and faster growth.
But more higher-paying jobs are also needed to sustain the economy’s momentum. Roughly half the jobs that were added in the six months through October were in four low-wage industries: retail; hotels, restaurants and entertainment; temp jobs; and home health care workers.
The Fed has pegged its stimulus efforts to consistent improvement in the job market. Bernanke has said the Fed will ease its monthly purchases of $85 billion in bonds once hiring has improved consistently.
The recent economic upturn has been surprising. Many economists expected the government shutdown in October to hobble growth. Yet the economy motored along without much interruption, according to several government and industry reports.
Early reports on holiday shopping have been disappointing. The National Retail Federation said sales during the Thanksgiving weekend — probably the most important stretch for retailers — fell for the first time since the group began keeping track in 2006.
Consumers are willing to spend on big-ticket items. Autos sold in November at their best pace in seven years, according to Autodata Corp. New-home sales in October bounced back from a summer downturn.
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