Solid U.S. job growth cuts unemployment to 7 percent

AP Economics WriterDecember 6, 2013 

Economy

In this Thursday, Nov. 14, 2013, file photo, retired U.S. Air Force Master Sgt. Thomas Gipson, of Atlanta, right, has his resume looked over by Ralph Brown, a management and program analyst with the Centers for Disease Control and Prevention, during a job fair for veterans at the VFW Post 2681,Marietta, Ga. The U.S. job market is proving sturdier than many had thought. Solid job growth in November cut the U.S. unemployment rate to 7 percent, a five-year low. (AP Photo/David Goldman, File)

DAVID GOLDMAN — AP

— The U.S. job market has been recovering fitfully for three years. Now, it’s starting to show consistency.

Employers added 203,000 jobs in November, and the unemployment rate fell to 7 percent, a five-year low. Stock investors were heartened by the news. The Dow closed up 198.69 points, or 1.3 percent, to 16,020.20.

The economy added an average of 204,000 jobs from August through November, up sharply from 159,000 a month from April through July. The robust gain suggested that the economy will begin to accelerate.

The job market has shown signs of strengthening at other times since the recession ended 4 1/2 years ago, only to weaken and discourage hopes. Some economists say this time, employers may have enough confidence in the economy and consumer demand to step up hiring. A sturdier job market would, in turn, accelerate Americans’ spending and energize economic growth.

“It’s hinting very, very strongly that the economy is starting to ramp up, that growth is getting better, that businesses are hiring,” said Joel Naroff, president of Naroff Economic Advisors.

The job growth has also fueled speculation that the Federal Reserve will scale back its economic stimulus when it meets later this month.

It “gives the Fed all the evidence it needs to begin tapering its asset purchases at the next … meeting,” said Paul Ashworth, an economist at Capital Economics.

The unemployment rate has fallen nearly a full percentage point since the Fed began buying bonds in September 2012 and has reached 7 percent earlier than most analysts had expected.

In June, Chairman Ben Bernanke had suggested that the Fed would end its $85 billion in monthly bond purchases after the unemployment rate reached 7 percent. The Fed’s bond purchases have been intended to keep borrowing rates low.

Bernanke later backed away from the 7 percent target. He cautioned that the Fed would weigh numerous economic factors in any decision it makes about its bond purchases. Many economists still think the Fed won’t begin to cut back until January or later.

In addition to the solid job gain and the drop in unemployment, Friday’s report offered other encouraging signs:

• Higher-paying industries are adding more jobs. Manufacturers added 27,000 jobs, the most since March 2012. Construction companies added 17,000. The two industries have created a combined 113,000 jobs over the past four months.

• Hourly wages are up. The average rose 4 cents in November to $24.15. It’s risen just 2 percent in the past year. But that’s ahead of inflation: Consumer prices are up only 0.9 percent in that time.

• Employers are giving their workers more hours: The average work week rose to 34.5 hours from 34.4. A rule of thumb among economists is that a one-10th hourly increase in the work week is equivalent to adding 300,000 jobs.

• Hiring was broad-based. In addition to higher-paying industries, retailers added 22,300 jobs, restaurants, bars and hotels 20,800. Education and health care added 40,000. And after years of cutbacks, state and local governments are hiring again. In November, governments at all levels combined added 7,000 jobs.

Still, the report contained some sour notes: Many Americans are still avoiding the job market, neither working nor looking for work. That’s one reason the unemployment rate has fallen in recent months. The percentage of adults either working or searching for jobs remains near a 35-year low.

And America’s long-term unemployed are still struggling. More than 4 million people have been out of work for six months or longer. That figure was essentially unchanged in November. By contrast, the number of people who have been unemployed for less than six months fell last month.

Among companies that are ramping up hiring is Eat24, which handles online restaurant deliveries. Eat24, based in San Francisco, expects this month to hire 10 to 15 salespeople, mobile application developers and data analysts, on top of its 150-person workforce.

“The economy is picking up a little bit,” said Amir Eisenstein, the chief marketing officer. “In the last couple of years, the mobile market has boomed.”

The steady decline in unemployment, from a high of 10 percent four years ago, is welcome news for the White House. But Jason Furman, President Barack Obama’s top economic adviser, said the plight of the long-term unemployed points to the need to extend emergency unemployment benefits.

About 1.3 million people who’ve been out of work for six months or more will lose unemployment aid if a 5-year-old program to provide extra benefits expires on Dec. 28. The Congressional Budget Office has estimated the cost of an extension at $25 billion. Some Republicans on the Hill have balked at the cost.

But on Thursday, House GOP leader John Boehner said he was willing to consider extending the program.

AP Economics Writer Josh Boak and AP Writer Jim Kuhnhenn contributed to this report.

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