Published December 07, 2012
WASHINGTON – Employers hired more workers than expected in November, with the labor market showing little apparent impact from Superstorm Sandy and jobs growth remaining on a steady but slow path.
At the same time, the jobless rate fell to a near four-year low, but that was only because so many Americans gave up the hunt for work, tempering the surprising news on jobs growth.
A big plunge in consumer confidence in December also offered a cautionary note on the economy's health.
Nonfarm employment increased by 146,000 jobs last month after rising by 138,000 in October, the Labor Department said on Friday, defying expectations of a sharp pullback related to Sandy.
The government said the storm, which slammed the densely populated East Coast in late October, did not have a substantive impact on last month's employment and unemployment estimates.
U.S. financial markets appeared to put more faith in the payroll growth figures. Stocks opened higher, the dollar strengthened and prices for U.S. government debt fell.
"The labor market is not getting worse, but is also not getting much better," said Jacob Oubina, a senior U.S. economist at RBC Capital Markets in New York.
November's job gains were in line with the trend that has prevailed all year. Job growth has averaged 151,000 per month since January, just enough to push the jobless rate lower, but only slowly. Economists say roughly 200,000-250,000 jobs per month are normally needed to really make headway.
The 0.2 percentage point drop in the unemployment rate last month to 7.7 percent -- the lowest since December 2008 -- reflected a decrease in the size of the labor force as measured by a survey of households. Economists generally rely more heavily on the payrolls reading from the separate and much larger survey of employers.
While job gains for both September and October were revised to show 49,000 fewer jobs created than earlier reported, the revision was concentrated in the government sector.
Private sector job growth did slow in November to 147,000 from 189,000 in October, but economists were heartened it did not drop off more in light of the storm.
"While more work remains to be done, today's employment report provides further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression," said Alan Krueger, chairman of the White House Council of Economic Advisers.
FISCAL CLIFF WORRIES
Employment continues to be held back by fears the government may fail to prevent the $600 billion in automatic tax hikes and government spending cuts set to take hold at the start of next year. The debt crisis in Europe has also weighed.
Worries about this "fiscal cliff" hit consumer sentiment in early December. The Thomson Reuters/University of Michigan's preliminary confidence reading plummeted to 74.5 in early December from 82.7 a month earlier.
"Confidence plunged in early December as consumers confronted the rising likelihood that political gridlock would push the country over the fiscal cliff," survey director Richard Curtin said in a statement.
With the labor market far from full health, Federal Reserve policymakers, who meet on Tuesday and Wednesday, look certain to keep U.S. monetary policy on its current ultra-easy course.
Economists said an anticipated tightening of fiscal policy next year, even if a deal is reached to avoid completely going over the fiscal cliff, provides ample reason for the U.S. central bank to maintain its stance.
"It doesn't change the outlook for the Fed ... I still would be expecting them to announce next week that they'll be extending their (bond) purchases to next year," said Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York.
Relentless labor market weakness led the Fed in September to launch a program to buy $40 billion worth of mortgage-backed securities every month to drive down borrowing costs.
That is on top of a program dubbed "Operation Twist" in which it was re-weighting securities it holds toward longer maturities. Twist expires at the end of this month and economists expect the Fed to replace it with a program that buys government bonds with newly created money.
All of the jobs gains in November were in the private sector, with government employment slipping 1,000.
Within the vast private services sector, retail employment gained 52,600 and professional and businesses services increased 43,000. Temporary help hiring increased 18,000.
In the goods-producing sector, manufacturing employment fell 7,000. Construction payrolls surprisingly dropped 20,000, despite a surge on homebuilding, which is benefiting from the Fed's accommodative policy stance.
Average hourly earnings increased four cents. In the 12 months to November, average hourly earnings rose 1.7 percent.
The length of the average workweek held steady at 34.4 hours in November.
(Editing by Andrea Ricci and Tim Ahmann)