Monday, Jun 18, 2018
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U.S. jobless rate drops to lowest in 2 1/2 years

November dip to 8.6% seen as welcome relief

NEW YORK -- The U.S. unemployment rate unexpectedly dropped last month to 8.6 percent, its lowest level in 2 1/2 years, according to figures released Friday by the Bureau of Labor Statistics.

Economists say there is a long way to go, but they liked what they saw.

"Something good is stirring in the U.S. economy," Ian Shepherdson, an economist at High Frequency Economics, said in a note to clients.

Private-sector employers added 140,000 jobs last month, the bureau reported in its survey of nonfarm payrolls, but the net job gain was dragged down by 20,000 government jobs lost at federal, state, and local levels.

The bureau also revised the September job estimates upward from the original 158,000 to 210,000, a strong number. October's estimate of 80,000 jobs gained also was revised up, by 20,000.

"The job market is firming at year's end. Job growth has picked up in recent months, particularly among smaller businesses. The employment gains have also broadened out across industries from retailing to manufacturing," said Mark Zandi, the chief economist for forecaster Moody's Analytics.

"The sharp improvement in unemployment is encouraging, but overstates the improvement. The job market is still struggling, but it is gaining momentum going into 2012."

The stock market rallied at the opening bell, after the report came out, but finished flat for the day.

It was still up 787 points for the week. The only bigger point gain in a week was in October, 2008, when stocks lurched higher and lower during the financial crisis.

"If you go back to August, all sorts of people were telling us that the economy was headed straight into recession," said Paul Ashworth, senior U.S. economist at Capital Economics. "Since that point, we've become more and more worried about the euro zone and other areas of the global economy, but somehow, at least for the moment, the U.S. economy seems to be shrugging all that off."

Even so, part of the reason the jobless rate fell so low was that 315,000 unemployed workers simply stopped applying for jobs.

President Obama, who faces a re-election vote in less than a year and a campaign that will turn on the economy, seized on Friday's report to argue for expanding a cut in the tax that workers pay toward Social Security. The tax cut affects 160 million Americans. It will expire Dec. 31 unless Congress acts.

"Now is not the time to slam the brakes on the recovery," Mr. Obama said. "Right now, it's time to step on the gas."

Resilient as the U.S. economy seems to have been since summer, the fate of the fragile recovery is still tied to external -- especially European -- events. Many economists worry a disorderly default of Greece or Italy, which still looks alarmingly possible, could plunge Europe into a depression.

If recent history is any guide, even a modest shock wave from across the ocean could throw the U.S. economy off-course; this year, a series of shocks from higher oil prices, the Japanese earthquake, and the stalemate over the U.S. debt ceiling managed to drain the energy from the recovery.

November's drop in unemployment was a welcome relief, given that the jobless rate had been stuck at 9 percent for most of 2011.

It is now at the lowest level since March, 2009; the rate has been above 8 percent for 33 months.

The share of workers who were unemployed fell in November partly because some people found jobs and partly because some discouraged workers dropped out of the labor force altogether. That left the share of Americans participating in the work force at a historically depressed 64 percent, down from 64.2 percent in October.

A separate survey of employers, which economists pay more attention to than the unemployment rate, found that companies added 120,000 jobs last month, after adding 100,000 jobs in October.

These numbers were not particularly impressive by historical standards -- payroll growth was just enough to keep up with population growth -- but there were other signs of resilience.

Companies have been adding more temporary workers, suggesting that more permanent hiring may be in the cards. Help-wanted advertising, retail sales, and auto sales have risen; jobless claims have fallen, and businesses seem to be getting loans more easily.

Perhaps most encouraging was a recent survey of small businesses that found hiring intentions to be at their highest level since September, 2008, when Lehman Brothers collapsed.

Still, serious concerns remain about the economy's ability to weather the financial and economic turmoil from abroad. The public sector continues to shed workers at the federal, state, and local levels.

And excluding the hundreds of thousands who have left the labor force, the country has a backlog of more than 13 million unemployed workers, whose average period of unemployment is at an all-time high of 40.9 weeks.

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