US recovery appears firmer as unemployment drops

US recovery appears firmer as unemployment drops

WASHINGTON - U.S. employers cut far fewer jobs than expected last month in the best showing for the labor market since the recession began, lifting the beleaguered U.S. dollar as investors bet a sustainable recovery was building.

By (Reuters)

Published: Sun 6 Dec 2009, 1:23 AM

Last updated: Thu 2 Apr 2015, 3:46 AM

The economy shed only 11,000 jobs in November, well below the 130,000 loss financial markets had braced for, while the unemployment rate unexpectedly dropped to 10 percent from October’s 10.2 percent, government data showed on Friday.

The data from the Labor Department signaled a broad-based improvement in the jobs market. In addition, job losses in September and October were revised down by a total of 159,000, contributing to the strong tenor of the report.

“It suggests that the labor market is much closer to its trough and more synchronized with broader measures of economic growth,” said Brian Fabbri, chief North America economist at BNP Paribas in New York.

Traders speculated the data could lead the Federal Reserve to raise interest rates sooner than had been thought.

That sent the dollar soaring and pushed down prices for U.S. government debt. Against a basket of currencies, the dollar posted its biggest gain in nearly five months.

U.S. and European stocks jumped on the data, although the U.S. market later fell back to trade close to flat as the rallying dollar weighed on commodity prices.

“The economy is lifting at a much greater rate than expected,” said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York.

A separate report on factory orders for October showed a higher-than-expected 0.6 percent rise and the first gain in inventories in more than a year. Still, a subset of the data seen as a proxy for business investment retreated 3.4 percent.

Help for obama

While the jobless rate edged down, high unemployment remains a political headache for President Barack Obama and fellow Democrats, who are worried they will lose seats in Congress in next November’s elections without a faster recovery.

Speaking in Pennsylvania, Obama described the data as good news and a sign that better days are ahead. But he emphasized that there is more work to do.

“We still have a long way to go. I still consider one job lost one job too many. The journey from here will not be without setbacks or struggle. There will be more bumps in the road. But the direction is clear,” Obama said.

On Thursday, Obama had appealed to the corporate sector to join in the administration’s employment-creation efforts, and the White House said on Friday the president would use a speech next week to discuss tapping the government’s $700 billion financial rescue fund to spur job creation.

Republicans have warned against using the Troubled Asset Relief Program as a political slush fund and have hammered the administration for steep job losses.

“Any decrease in the unemployment rate is encouraging, but a jobless recovery and double-digit unemployment is not what the American people were promised,” said House Republican leader John Boehner.

Sustainable recovery hopes

While the economy resumed growth in the third quarter after four straight quarters of decline, government stimulus fueled the growth and economists have worried a weak labor market would keep the recovery from becoming self-sustaining.

“The data point to a transition in the economy from a deep recession to a modest recovery,” said William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida.

“This will encourage the Fed to be more vocal about an exit strategy from their highly accommodative posture,” he said.

The Fed cut interest rates close to zero last December and has pumped more than $1 trillion into the economy to try to spur recovery from the worst recession in 70 years.

Since December 2007 when the recession began, 7.2 million jobs have been lost, the Labor Department said. But the pace of lay-offs has slowed sharply from early this year.

The November data was the strongest since December 2007, when non-farm payrolls increased by 120,000.

The government added jobs for a second straight month, and payrolls grew in education and health services, as well as professional services. All told, the service-providing sector added 58,000 workers, up from an addition of 2,000 jobs in October.

At the same time, job losses on the goods-producing side of the economy slowed.

Manufacturing payrolls fell by 41,000 after dropping 51,000 in October, and the construction sector shed 27,000 jobs, a sharp easing from the average 63,000 decline in the prior six months.

A rise in temporary hiring and an increase in the length of the average workweek offered a suggestion that companies may start to hire permanent staff not too far down the road.

However, there were weak points. About 5.9 million Americans had been out of work for more than 27 weeks last month, representing 38.3 percent of the total unemployed.

In addition, the average duration of unemployment touched a record 28.5 weeks.

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