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The unemployment rate in the US fell to a two and a half year low in November, even though the pace of hiring remained too slow to suggest a significant quickening of the recovery.
Nonfarm payrolls increased by 120,000 jobs last month, the labour department said on Friday, and the jobless rate dropped to 8.6 per cent, the lowest since March 2009, from 9.0 per cent in October.
It was the biggest monthly decline since January. While part of the decrease was due to people leaving the labour force, the household survey from which the department calculates the unemployment rate also showed solid gains in employment.
“The economy is continuing to head in the right direction,” said Millan Mulraine, senior macro strategist at TD Securities in New York. “However, the ultimate test of the sustainability of the recovery is for the economy to create a sufficient number of jobs to sustain a consumer-led rebound in activity.”
“On this measure, this report falls short,” he said.
Although the gain in the number of jobs created as measured by the survey of employers was relatively modest, it marked a pickup from October’s upwardly revised 100,000 increase.
In all, 72,000 more jobs were created in October and September than previously reported.
The retail sector accounted for more than a third all new private sector jobs in November as shops geared up for a busy holiday season, but average earnings fell two cents.
Data ranging from manufacturing to retail sales suggest the US economy’s growth pace could top three per cent in the fourth quarter, an acceleration from the third quarter. In contrast, much of the rest of the world is slowing and the euro zone appears to have already fallen into recession.
Stocks on Wall Street opened higher on both the employment report and growing optimism of a solution to the European debt crisis, while prices for US government debt fell. The dollar was little changed against a basket of currencies.
The report could temper the appetite among some Federal Reserve officials to ease monetary policy further.
In forecasts released earlier this month, the Fed said the jobless rate would likely average nine per cent to 9.1 per cent in the fourth quarter. It did not expect it to drop to an 8.5 per cent to 8.7 per cent range until late next year.
However, it is unlikely to take much pressure off President Barack Obama, whose economic stewardship will face the judgment of voters next November.
While the recovery appears to be gathering momentum, the economy faces big risks from the euro zone’s crisis and a tightening of US fiscal policy.
Analysts say the economy normally needs to create at least 125,000 jobs every month just to keep the unemployment rate steady.
While the government’s survey of employers has shown a still-tepid pace of job growth, its separate poll of households has shown robust jobs gains for four straight months amounting to 1.28 million.
Analysts were unperturbed by the exit by 315,000 people from the labor force last month, noting that more people had piled in over the last three months. Excluding this drop, the unemployment rate would have edged down to just 8.9 per cent.
“Some of the decline in the unemployment rate must be seen as catch-up to strong household employment of recent months,” said Alan Ruskin, head of G10 currency strategy at Deutsche Bank in New York.
At the same time, a broad measure of unemployment that includes people who want to work but have given up looking for jobs and those working only part time for economic reasons dropped to a 2-1/2 year low of 15.6 percent in November from 16.2 percent in October.
PRIVATE SECTOR SHOULDERS BURDEN
All the increase in nonfarm payrolls in November came from the private sector, where employment rose 140,000 after increasing 117,000 in October.
Government employment fell by 20,000. Public payrolls have dropped in 10 of the past 11 months as state and local governments have tightened their belts.
Outside of government, job gains were almost across the board, with retail surging 49,800.
Elsewhere, construction payrolls fell 12,000 after losing 15,000 jobs in October. Factory jobs edged up 2,000, with most of the gains coming from automakers.
Healthcare and social assistance hiring rose 18,700 after adding 30,300 jobs in October. Temporary hiring -- seen as a harbinger for future hiring - increased 22,300 after adding 15,800 jobs last month.
The average work week was unchanged at 34.3 hours.
Wall Street rises 1% on jobs, Europe
Major stock indexes rose more than one per cent on Friday after data showed the US jobless rate dropped to a two and a half year low and as policymakers appeared to move closer to tackling Europe’s debt crisis.
The Dow Jones industrial average gained 121.24 points, or 1.01 per cent, to 12,141.27. The Standard & Poor’s 500 Index gained 15.10 points, or 1.21 per cent, to 1,259.68. The Nasdaq Composite Index gained 32.59 points, or 1.24 per cent, to 2,658.79.