The troubled US economy and President Barack Obama’s embattled administration have received a measured confidence boost after official unemployment figures sank to a 32-month low in November.
The jobless rate fell sharply to 8.6 per cent from 9.0 per cent in October, while the economy created 120,000 new jobs, the government announced on Friday.
After a year that saw joblessness linger around 9.0 per cent, the report was welcomed with relief, though the numbers were boosted by seasonal hiring and job hunters who dropped out of the search.
“Woo-hoo!” said Robert Brusca, chief economist at FAO Economics. “The jobs numbers are looking better.”
Analysts also pointed to upward revisions of past reports as evidence that the strength of the labour market has been understated for months.
But while the labour department’s report was one of the strongest since the global economic crisis began in 2008, it was not uniformly positive.
Job-hunters drop out
Economists pointed to a worryingly sharp drop in the number of people looking for work, which helped push down the unemployment rate further than would have been the case.
The labour department said that 52 per cent of the drop was attributable to 315,000 people who simply quit looking for a job, and are thus not counted as being part of the labour force. Add them back in, and the “real unemployment” rate breaks 9 per cent again.
Meanwhile, the net creation of 120,000 jobs was not as strong as expected, as government job cuts continued to eat into private sector gains. Many of the new jobs are probably season retail positions leading into the holidays, analysts said.
The net gain was below the average 131,000 of the past 12 months. But amid renewed global turmoil, the report offered a glimmer of hope that the United States is on the way to reassuming its role as an anchor for the world economy.
“Something good is stirring in the US economy,” said Ian Shepherdson, chief US economist with High Frequency Economics.
Obama gives cautious praise
The news could also provide a boost to Obama’s hopes of re-election next November, giving him some defence against Republican claims that he has failed to get the economy back on track since the recession ended more than two years
The unemployment rate now stands only slightly above the 8.5 per cent rate that Ronald Reagan faced at the same point during his successful 1984 presidential re-election campaign.
But with recent data proving a sharp drop in unemployment can easily come back up again, Obama was careful not to declare victory prematurely.
“Despite some strong headwinds this year, the American economy has now created, in the private sector, jobs for the past 21 months in a row,” he said. “That’s nearly three million new jobs in all and more than half a million over the last four months … We need to keep that growth going.”
Obama and his advisers will also be acutely aware that his efforts can be eroded by the financial crisis sweeping Europe.
Attempting to press home the advantage, Obama demanded Republicans back soon-to-expire payroll tax cuts, which the administration says will help stimulate the economy.
Republicans dismiss gains
Both sides, eager to court voters angry at the sour US economy ahead of the November 2012 elections, say they agree on extending the cut but differ bitterly on how to pay for it in an era of yawning government budget deficits.
But in a signal of the White House’s determination to push the issue, Obama said legislators may have to stay in Washington until a deal is done.
“I expect that it’s going to get done before Congress leaves, otherwise Congress may not be leaving. We can all spend Christmas here together.”
“We’re going to keep pushing Congress to make this happen,” he said.
Republican legislators said the drop in unemployment was not enough.
“Any job creation is welcome news, but the jobless rate in this country is still unacceptable,” said John Boehner, speaker of the Republican-controlled House of Representatives. “The president’s policies have failed.”