Unemployment Drops to 7% in November, Lowest in Five Years

Andrew Klips |

The United States added more jobs in November than expected and the unemployment rate falling 0.3 percent to five year lows, according to a report Friday morning from Washington.  Wall Street finally seemed to have decided that good news is good news with market futures at first slipping upon the news and then reversing course to soar higher.  The Dow Jones Industrial Average and S&P 500 had fallen in the five previous sessions as investors interpreted upbeat economic data as a signal for the Federal Reserve to begin tapering its tremendous stimulus package.

The Labor Department reported that the economy added 203,000 new non-farm jobs in November, topping economist predictions of 182,000 job additions.  The unemployment rate fell from 7.3 percent in October to 7.0 percent in November, marking the lowest level since November 2008.  Economists thought the unemployment rate would edge down to 7.2 percent.

Meanwhile, the September jobs figure was revised from 163,000 additions to 175,000, and the October figure was revised from +204,000 to +200,000, for a combined 8,000 more jobs being added than originally estimated.

Today’s news added to reports from throughout the week that showed the jobs market is gathering some steam.  On Wednesday, ADP estimated that the nation added 215,000 in November.  Yesterday, the Labor Department reported that initial jobless claims last week fell by 23,000 to 298,000, representing the lowest figure since the week ended September 7.

The report on the employment situation is always closely watched, but has grown even greater in importance recently as investors look to moves from the Federal Reserve to begin hitting the brakes on its policy of buying $85 billion each month in Treasuries and mortgage-backed securities, known as QE3, that has largely been attributed for the strong climb in stocks in 2013.  The Fed brought up the idea of beginning tapering during the summer, but has prolonged the start amid mixed economic data.  With the litany of optimistic data so far in December, economists believe that tapering could begin this month or, at worst, early in 2013.

Philadelphia Fed President Charles Plosser, who was never a big fan of QE3, told CNBC this morning that the economy is growing at a reasonable pace and tate it would be wise to find a way to gracefully exit the stimulus program now.

The labor force participation rate changed little (63.0 percent) in November, holding near 35-year lows.  Some economists have contested that the unemployment rate is only as low as it is because a lot of people aren’t looking for work, as gauged by the participation rate.  Plosser addressed that, saying that the low participation rate is more a product of low because of baby boomers moving into retirement and that we shouldn’t even be looking for levels as high as in recent decades.

The job additions in November were wide spread across industries.  Employment in transportation and warehousing rose by 31,000; health care employment increased 28,000; manufacturers added 27,000 jobs; professional and business services jobs rose by 35,0000; retail trade employment grew by 22,000; and construction jobs expanded to 17,000.

Federal government jobs declined by 7,000 during the month.

The average workweek inched up by 0.1 hour to 34.5 hours in November for all employees on non-farm payrolls.  Factory overtime edged ahead by the same amount to 3.5 hours.

Average hourly earnings rose 4 cents to $24.15.  In the past 12 months, average hourly earnings have rise 2 percent, or 48 cents.

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