Unemployment Falls to 7 Percent as 203,000 Jobs Added

Friday, 06 Dec 2013 08:41 AM

 

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The U.S. job market is proving sturdier than many thought.

Solid job growth in November cut the U.S. unemployment rate in November to 7 percent, a five-year low. The surprisingly robust gain suggested that the economy may have begun to accelerate. As more employers gain the confidence to step up hiring, more people have money to spend to drive the economy.

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 added a four-month average of 204,000 jobs from August through November, up from 159,000 a month from April through July.

Editor’s Note: Obama’s Budget Takes Aim at Retired Americans

"It's hinting very, very strongly that the economy is starting to ramp up, that growth is getting better, that businesses are hiring," said Joel Naroff, president of Naroff Economic Advisors.

The job growth has also fueled speculation that the Federal Reserve will scale back its economic stimulus when it meets later this month.

It "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 September 2012 and hit 7 percent earlier than most analysts expected.

In June, 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. He cautioned that the Fed would weigh numerous economic factors in any decision it makes about its bond purchases.

Many economists still think the Fed won't begin to cut back until its January meeting or later.

In addition to the solid job gain drop in unemployment, the November employment report contained 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.

• Employers are giving their workers more hours: 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 its slowest pace since late 2009.

But more people with jobs would lead to more 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.

Editor’s Note: Obama’s Budget Takes Aim at Retired Americans

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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