Bloomberg News

Payroll Gains Improve as U.S. Unemployment Rate Drops: Economy

December 07, 2011

Dec. 3 (Bloomberg) -- Payroll gains in the U.S. improved last month, while an increase in the number of Americans leaving the workforce helped push the jobless rate down to 8.6 percent, the lowest level since March 2009.

Employment climbed by 120,000 workers in November, with more than half the hiring coming from retailers and temporary help agencies, after a 100,000 gain the prior month, Labor Department figures showed yesterday in Washington. Revisions to prior figures added a total of 72,000 jobs to payrolls in September and October.

“This is a good report that holds out hope for better things to come,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. It’s still “not so great that anyone should think the labor market is healthy and all is well with the world,” he said.

President Barack Obama used the data to push for an extension of a payroll-tax cut he says is needed to maintain the expansion and reduce the jobless rate further. The report also damped speculation that Federal Reserve policy makers meeting on Dec. 13 will embark on another round of large-scale asset purchases.

Most stocks rose, capping the biggest weekly rally since March 2009 in the Standard & Poor’s 500 Index. The S&P 500 gained 7.4 percent this week. The yield on the benchmark 10-year Treasury note fell to 2.04 percent yesterday from 2.09 percent late the previous day.

Europe Crisis

There were also signs Europe’s troubles may be starting to ease. A European proposal to channel central bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($270 billion) to fight the debt crisis, two people familiar with the negotiations said.

At a Nov. 29 meeting attended by European Central Bank President Mario Draghi, euro-area finance ministers gave the go- ahead for work on the plan, said the people, who declined to be named because the talks are at an early stage.

Europe’s debt crisis has been a source of uncertainty on the outlook for the U.S. economy, prompting companies such as DirecTV to keep a tight rein on spending and employment.

“We’re tightening our belts in terms of spending,” Michael White, chief executive officer of the largest U.S. satellite-TV provider, said in an interview last week. “We’ll cut back on overhead, hiring and programming.”

Among companies expanding payrolls is Boeing Co., the largest U.S. aircraft maker. The Chicago-based company is hiring about 100 machinists a week as it boosts production by about 60 percent over three years to whittle down a backlog that now stretches to nearly 4,000 aircraft.

Household Survey

The unemployment rate, derived from a separate survey of households, was forecast to hold at 9 percent. The decrease in the jobless rate reflected a 278,000 gain in employment at the same time 315,000 Americans left the labor force.

“While the rate is certainly a very favorable rate, I would highlight that a lot of it is because people pulled out of the workforce,” Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a speech yesterday. Rosengren said in a Nov. 16 speech that the central bank still has power to boost the economy through lower interest rates.

Obama said the drop in the jobless rate is a sign the recovery is getting stronger, and extending a cut in the payroll tax will provide more fuel for the economy.

Energy Efficiency

“We need to keep that growth going,” Obama said after he and former President Bill Clinton toured a building in Washington yesterday to promote a government and private industry initiative to upgrade the energy efficiency of public and commercial buildings that the administration says will help create construction jobs.

Employment at service-providers increased 126,000 in November, including a 50,000 gain in retail trade as companies began hiring for the holiday shopping season. The number of temporary workers increased 22,300.

Macy’s Inc., the second-biggest U.S. department-store chain, increased mostly part-time staff by 4 percent for the November-December shopping season. See’s Candies Inc., a chocolate maker owned by Berkshire Hathaway Inc., said it would add 5,500 mostly temporary workers.

Private hiring, which excludes government agencies, rose 140,000 after a revised gain of 117,000. Still, factory payroll growth slowed and construction employment dropped.

Government payrolls decreased by 20,000 in November, including a 16,000 decline on the state and local levels.

Limited Wage Gains

Even as payrolls grow, limited wage gains are restraining consumers’ ability to boost spending, which accounts for about 70 percent of the economy. Average hourly earnings fell 0.1 percent to $23.18, yesterday’s report showed. The average work week for all workers held at 34.3 hours.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 15.6 percent from 16.2 percent.

The report also showed an increase in long-term unemployed Americans. The number of people unemployed for 27 weeks or more climbed as a share of all jobless to 43 percent from 42.4 percent.

“Whether the swoon in the unemployment rate is legitimate or not, the doves on the Fed have just been sidelined from advocating QE3, at least for the next few months,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, referring to a third round of asset purchases.

--With assistance from Chris Middleton and Roger Runningen in Washington. Editors: Vince Golle, Carlos Torres

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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