 "Lowest jobless rate in 5 years raises odds of a Fed move")
After years of frustrating fits and starts in the wake of the financial crisis and the Great Recession, the US economy finally appears to be generating jobs at a healthier, more sustainable pace that many analysts now think will continue into 2014. The official unemployment rate fell in November to its lowest level since 2008.
Employers have hired at least 200,000 workers in three of the last four months, including 203,000 in November. By contrast, as recently as July, when the economy seemed stuck in yet another summer swoon, only 89,000 new jobs were created.
The better-than-expected data from the Labor Department on Friday follows other hopeful economic indicators this week, including an upward revision for economic growth in the third quarter on Thursday and an uptick in manufacturing reported on Monday.
The 7 per cent unemployment rate last month - down from its most recent peak of 10 per cent in October 2009 - is the best reading since President Obama took office, providing one bright spot for a White House beleaguered on many other fronts. The unemployment rate was 7.3 per cent in December 2008, the month before Obama was inaugurated.
"The headwinds are fading and the tailwinds are gaining strength," said Michael Hanson, senior United States economist at Bank of America Merrill Lynch, ticking off sources of growth like pent-up demand for automobiles, a rebounding housing sector and the surging stock market.
The stock market rose by more than 1 per cent after the jobs report, as traders concluded that the prospect of higher employment and faster economic growth outweighed the increased likelihood that the Federal Reserve would soon begin easing back on its stimulus efforts.
While there is a chance that policy makers will act when they meet later this month, most experts say they believe that Fed officials want to see a little more consistency to the data before they begin tapering, probably early in 2014.
"We consider it a strong report but it's not something that would cause the Fed to move," said Michael Gapen, senior United States economist at Barclays. "Our scenario is still March."
One reason for remaining cautious is that there have been several false dawns before in the current recovery, including in early 2011 and again in early 2012, when encouraging monthly hiring gains quickly petered out. And some economists warned on Friday that it was too soon to conclude the labor market had turned a corner.
"We still need more evidence that the economy is picking up momentum before we ring the victory bell," said Julia Coronado, chief economist for North America at BNP Paribas. While the unemployment rate, which counts only people actively looking for work, has fallen to 7 per cent, from 7.8 per cent a year ago, she said that was largely because of people dropping out of the work force.
Moreover, the current level is well above the 5 per cent rate that economists consider closer to full employment. At the current rate of job creation, unemployment would fall to 6.4 per cent by the end of 2014, and still be around 5.7 per cent in late 2015. Despite the overall improvement in the employment picture, the situation remains desperate for many American workers and those seeking jobs.
For people with less than a high school diploma, for example, the jobless rate last month stood at 10.8 per cent. For African-Americans, it was 12.5 per cent, or nearly twice what it was for whites.
No improvement was seen in the fate of the long-term unemployed, either, with the ranks of people who have been seeking jobs for more than 27 weeks actually rising slightly in November to 4.06 million. Employers remain wary of workers with long gaps in their resumes, and skills erode the longer people are out of a job.
"We still have a crisis in terms of long-term unemployment," said Christine L Owens, executive director of the National Employment Law Project, an advocacy group for low-wage and unemployed workers. "We need solutions like extending support while also encouraging policies that will promote re-employment," she added, citing potential programs like tax breaks for firms that hire the long-term jobless.
Still, unlike some other months that presented decidedly contradictory signals, many of the underlying factors identified by government statisticians at least pointed in the right direction. Hourly earnings, as well as the length of the typical workweek, both increased. The overall labor participation rate, while still low by historical standards, rose two-tenths of a percentage point to 63 per cent.
At the same time, jobs were added to a broad range of sectors, rather than restricted to a few, lower-paying areas.
Manufacturing, closely watched because its ups and downs serve as a bellwether of the overall economy, added 27,000 workers. Besides that jump, Gapen of Barclays said he was also glad to see that the construction sector gained jobs for the third month in a row, indicating that housing continues to rebound.
For economists, one mystery to ponder, or at least one assumption to question in retrospect, will be why the government shutdown and debt-default standoff in October did not hurt the economy as much as feared. The return of government workers after the shutdown may have exaggerated the fall in the unemployment rate, which is based on a separate survey from the one that calculates payroll gains, but private employers do not appear to have taken much notice of the shenanigans in the nation's capital.
"It seems like the market and businesses thought a deal would get done at the last minute," Gapen said. "The default scenario wasn't a credible threat."
Wall Street has rallied since legislators veered away from the precipice in October, and that trend continued on Friday.
The Standard & Poor's 500-stock index surged 20.06 points, or 1.1 percent, to 1,805.09, its biggest increase in four weeks. The Dow Jones industrial average rose 198.69 points, or 1.3 percent, to finish the week at 16,020.20, while the Nasdaq composite climbed 29.36 points, or 0.7 percent, to 4,062.52. In the market for government bonds, the price of the benchmark 10-year Treasury note rose 5/32 to 99 3/32, and its yield dipped to 2.86 percent from 2.87 late Thursday.
For all the optimism generated by Friday's report on the labor market as well as the buoyant mood on Wall Street as the year draws to a close, 2013 is nonetheless expected to end with more of a whimper than a bang. One reason is a strong buildup in inventories during the summer that is likely to hold back production while companies work off their excess stock of goods on shelves and in warehouses.
Hours after the job numbers came out, one widely followed forecasting firm, Macroeconomic Advisers, cut its estimate for growth in overall economic activity for the final three months of 2013 to just 1.3 percent, compared with 3.6 percent in the third quarter.
"We haven't gotten to a place where consumers are experiencing solid wage gains," said Ms. Coronado of BNP Paribas.
Employers have hired at least 200,000 workers in three of the last four months, including 203,000 in November. By contrast, as recently as July, when the economy seemed stuck in yet another summer swoon, only 89,000 new jobs were created.
The better-than-expected data from the Labor Department on Friday follows other hopeful economic indicators this week, including an upward revision for economic growth in the third quarter on Thursday and an uptick in manufacturing reported on Monday.
The 7 per cent unemployment rate last month - down from its most recent peak of 10 per cent in October 2009 - is the best reading since President Obama took office, providing one bright spot for a White House beleaguered on many other fronts. The unemployment rate was 7.3 per cent in December 2008, the month before Obama was inaugurated.
"The headwinds are fading and the tailwinds are gaining strength," said Michael Hanson, senior United States economist at Bank of America Merrill Lynch, ticking off sources of growth like pent-up demand for automobiles, a rebounding housing sector and the surging stock market.
The stock market rose by more than 1 per cent after the jobs report, as traders concluded that the prospect of higher employment and faster economic growth outweighed the increased likelihood that the Federal Reserve would soon begin easing back on its stimulus efforts.
While there is a chance that policy makers will act when they meet later this month, most experts say they believe that Fed officials want to see a little more consistency to the data before they begin tapering, probably early in 2014.
"We consider it a strong report but it's not something that would cause the Fed to move," said Michael Gapen, senior United States economist at Barclays. "Our scenario is still March."
One reason for remaining cautious is that there have been several false dawns before in the current recovery, including in early 2011 and again in early 2012, when encouraging monthly hiring gains quickly petered out. And some economists warned on Friday that it was too soon to conclude the labor market had turned a corner.
"We still need more evidence that the economy is picking up momentum before we ring the victory bell," said Julia Coronado, chief economist for North America at BNP Paribas. While the unemployment rate, which counts only people actively looking for work, has fallen to 7 per cent, from 7.8 per cent a year ago, she said that was largely because of people dropping out of the work force.
Moreover, the current level is well above the 5 per cent rate that economists consider closer to full employment. At the current rate of job creation, unemployment would fall to 6.4 per cent by the end of 2014, and still be around 5.7 per cent in late 2015. Despite the overall improvement in the employment picture, the situation remains desperate for many American workers and those seeking jobs.
For people with less than a high school diploma, for example, the jobless rate last month stood at 10.8 per cent. For African-Americans, it was 12.5 per cent, or nearly twice what it was for whites.
No improvement was seen in the fate of the long-term unemployed, either, with the ranks of people who have been seeking jobs for more than 27 weeks actually rising slightly in November to 4.06 million. Employers remain wary of workers with long gaps in their resumes, and skills erode the longer people are out of a job.
"We still have a crisis in terms of long-term unemployment," said Christine L Owens, executive director of the National Employment Law Project, an advocacy group for low-wage and unemployed workers. "We need solutions like extending support while also encouraging policies that will promote re-employment," she added, citing potential programs like tax breaks for firms that hire the long-term jobless.
Still, unlike some other months that presented decidedly contradictory signals, many of the underlying factors identified by government statisticians at least pointed in the right direction. Hourly earnings, as well as the length of the typical workweek, both increased. The overall labor participation rate, while still low by historical standards, rose two-tenths of a percentage point to 63 per cent.
At the same time, jobs were added to a broad range of sectors, rather than restricted to a few, lower-paying areas.
Manufacturing, closely watched because its ups and downs serve as a bellwether of the overall economy, added 27,000 workers. Besides that jump, Gapen of Barclays said he was also glad to see that the construction sector gained jobs for the third month in a row, indicating that housing continues to rebound.
For economists, one mystery to ponder, or at least one assumption to question in retrospect, will be why the government shutdown and debt-default standoff in October did not hurt the economy as much as feared. The return of government workers after the shutdown may have exaggerated the fall in the unemployment rate, which is based on a separate survey from the one that calculates payroll gains, but private employers do not appear to have taken much notice of the shenanigans in the nation's capital.
"It seems like the market and businesses thought a deal would get done at the last minute," Gapen said. "The default scenario wasn't a credible threat."
Wall Street has rallied since legislators veered away from the precipice in October, and that trend continued on Friday.
The Standard & Poor's 500-stock index surged 20.06 points, or 1.1 percent, to 1,805.09, its biggest increase in four weeks. The Dow Jones industrial average rose 198.69 points, or 1.3 percent, to finish the week at 16,020.20, while the Nasdaq composite climbed 29.36 points, or 0.7 percent, to 4,062.52. In the market for government bonds, the price of the benchmark 10-year Treasury note rose 5/32 to 99 3/32, and its yield dipped to 2.86 percent from 2.87 late Thursday.
For all the optimism generated by Friday's report on the labor market as well as the buoyant mood on Wall Street as the year draws to a close, 2013 is nonetheless expected to end with more of a whimper than a bang. One reason is a strong buildup in inventories during the summer that is likely to hold back production while companies work off their excess stock of goods on shelves and in warehouses.
Hours after the job numbers came out, one widely followed forecasting firm, Macroeconomic Advisers, cut its estimate for growth in overall economic activity for the final three months of 2013 to just 1.3 percent, compared with 3.6 percent in the third quarter.
"We haven't gotten to a place where consumers are experiencing solid wage gains," said Ms. Coronado of BNP Paribas.
© 2013 The New York Times News Service