Saturday, December 08, 2012

US Jobless Figures Show 350,000 Give Up Looking for Work in November

Despite drop in jobless rate, concerns remain

By Megan Woolhouse
Globe Staff
December 07, 2012

Employers added 146,000 jobs in November. A store in San Francisco advertised that it was looking for workers Friday.

US employers added more jobs than expected last month, but the rate of job growth remains so slow that it would take another decade at the current pace to return unemployment to its prerecession level, economists said.

The unemployment rate fell to 7.7. percent last month from 7.9 percent in October, the Labor Department reported Friday, but the decline was largely due to some 350,000 workers giving up job searches, rather than more people finding jobs. Only those who actively seek work are counted by the Labor Department as unemployed.

“The November data provide a clear reminder that mass joblessness remains the real and present economic danger this country faces,” said Heidi Shierholz, an economist at the Economic Policy Institute, a Washington think tank.

The November jobs report provided more evidence that the US economy is improving — enough to help stocks rally, but too slowly to help millions of out-of-work Americans.

Employers added 146,000 jobs in November, more than what was forecast by many economists, who expected the impact of Hurricane Sandy to depress hiring.

The Dow Jones industrial average gained 81 points to close at 13,155. The broader Standard & Poor’s 500 index rose 4 points to 1,418. The technology heavy Nasdaq Composite index fell 11 to 2,978.

Private employers have added jobs for 33 consecutive months, and the November unemployment rate was the lowest in four years. But more than 12 million workers remain unemployed, and 5 million of them have been unemployed for more than six months.

Nigel Gault, chief US economist at IHS Global Insight, a Lexington forecasting firm, said the economy does not have much momentum, particularly compared with the period from July through September, when it benefited from a burst of defense spending. The increase may have been due to Pentagon officials spending more in anticipation of defense cuts if Congress cannot agree on a plan to avoid the so-called fiscal cliff.

Concerns over politicians’ ability to avoid the fiscal cliff — the mix of tax increases and spending cuts that threaten to push the economy into recession — may also be affecting spending decisions by businesses and consumers, Gault said. He attributed a recent decline in business investment to the political standoff.

And, he added, “consumers seem to have woken up to the fact that this is potentially really bad.” The Thomson Reuters/University of Michigan index of consumer sentiment fell sharply in early December, declining to a four-month low.

While worrisome, this decline in confidence could have an upside, Gault said. “If consumers start to worry, the pressure on politicians will ramp up,” he said. “They only do things when there’s a lot of pressure on them.”

Friday’s employment report showed only “modest” economic growth, said Jim O’Sullivan, chief US economist for High Frequency Economics, a forecasting firm in Valhalla, N.Y. But he said a resolution to the political standoff in Washington could make employers less cautious in the new year.

“That could give hiring a lift,” he said.

Labor Secretary Hilda L. Solis noted that most sectors gained jobs in November. Retailers added 53,000 jobs in anticipation of increased holiday sales, she added, another positive sign for the economy.

“There’s more work to be done,” Solis said in a statement, “but our economic recovery remains on the right trajectory.”

Simon Johnson, an economics professor at the Massachusetts Institute of Technology and former chief economist for the International Monetary Fund, said the jobs report was stronger than he anticipated. It could lead the Federal Reserve policy makers to think twice about continuing to stimulate the economy.

The Fed has been buying billions in mortgage-backed securities every month, as a way to drive down interest rates and spur the housing market. It is also contemplating whether to do more to help bring down the unemployment rate. Policy makers will meet in Washington Tuesday and Wednesday to consider what, if any, additional actions they should take.

“Prior to today, I thought the Fed would be pretty aggressive next week,” Johnson said. “I think they’ll back off or slow down.”

It’s not clear when the central bank might start raising interest rates and pulling back from stimulative policies, but Johnson said he expects that to occur “sooner than is indicated.”

Megan Woolhouse can be reached at Follow her on Twitter @megwoolhouse.

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