US unemployment rate falls to 5-year low of 7 percent as employers add 203,000 jobs

  • Article by: CHRISTOPHER S. RUGABER , Associated Press
  • Updated: December 6, 2013 - 2:20 PM
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The November jobs report solidified the view that the American economy is in full recovery mode. Unemployment fell to 7% from 7.3% in October and 7.2% in September.

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WASHINGTON — 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 Jones industrial average surged 180 points in late-afternoon trading.

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. As more employers step up hiring, more people have money to spend to drive the economy.

The job market has shown signs of strengthening at other times since the recession ended 4½ 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-tenth 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.

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