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Jobless rate drops sharply to 8.6 percent

WASHINGTON — Employers added 120,000 jobs in November, and the unemployment rate fell sharply to 8.6 percent, the government said Friday in a report that brought holiday cheer for the sluggish U.S. economy.

Private-sector employers actually added 140,000 jobs last month, the Bureau of Labor Statistics reported in its survey of nonfarm payrolls, but that number was dragged lower by the 20,000 jobs lost on the federal, state and local government levels.

The agency revised sharply upward the September job estimates, from the original 158,000 to an actual 210,000 — a very strong number. October's estimate of 80,000 jobs was revised upward by 20,000.

"The job market is firming at year's end. Job growth has picked up in recent months, particularly among smaller businesses. The employment gains have also broadened out across industries from retailing to manufacturing," said Mark Zandi, chief economist for forecaster Moody's Analytics. "The sharp improvement in unemployment is encouraging, but overstates the improvement. The job market is still struggling, but it is gaining momentum going into 2012."

The sharp fall in the unemployment rate, while a potential boost to the political fortunes of President Barack Obama, is somewhat a vexing development. The jobless rate fell from 9 percent to 8.6 percent in November, and two factors seemed at play.

First, there was an outsized decline of 315,000 persons in the workforce. Those presumably are people who gave up looking for work, and they could eventually re-enter the workforce. Alan Krueger, the new head of the White House Council of Economic Advisers, said in a statement that the shrinking of the labor force accounted for about half of the fall in the unemployment rate.

"About half of the drop in unemployment in the household survey was due to a decline in the labor force (-315,000) and about half to employment growth (+278,000)," Krueger wrote.

Economists at RDQ Economics, a New York forecaster, argued in a research note that the household survey for four straight months has shown stronger employment gains than the payroll survey has. RDQ economists, in their note to investors, said the unemployment rate has shown "a more rapid decline than one would have expected given the data on the broader economy."

The household survey is believed a better gauge of small employers, who may not be captured by the payroll survey, which boasts a larger sample size. On Wednesday, a key private-sector employment gauge also surprised with strong numbers. The ADP National Employment Report said 206,000 private-sector jobs were created in November.

The strong job numbers correspond with a trend of economic indicators that have been coming in better than expected of late. These include automobile sales, Black Friday sales by retailers and a key manufacturing index by the Institute of Supply Management. They all point to a firming economic recovery.

"November's employment gain, augmented by net upward revisions of 72,000 to September-October readings, continues the run of U.S. economic data showing heartening (and in its degree somewhat surprising to us) resilience in the face of the deepening euro area debt crisis," Alan Levonson, chief economist for investment giant T. Rowe Price, wrote in a research note.

Economists for Bank of America Merrill Lynch, in an analysis of the Friday numbers, characterized the good jobs numbers with a catchy headline: "Employment: Labor market moved into second gear." The U.S. economy has built momentum heading into 2012, they said. "Over the last three months, the U.S. economy has been generating roughly 145,000 jobs per month — not a blow-out, to be sure, but still ahead of what we saw in the summer. The weakness in employment continues to be in the state and local government sector," they wrote.

Employment gains were posted in most sectors of the economy. Job leaders included the retail sector, which added 50,000 posts. The broad white collar category of professional and business services rose by 33,000. Temporary employment, usually a harbinger of future employment, increased by 22,300 positions. Leisure and hospitality, also a harbinger of increased white-collar and business spending, rose by 22,000.

Manufacturing employment was largely unchanged for the month, while the hard-hit construction sector shed another 12,000 jobs.

Jobless rate drops sharply to 8.6 percent 12/02/11 [Last modified: Friday, December 2, 2011 11:38pm]
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