Payroll Gains Improve as U.S. Unemployment Rate Drops

Payroll gains in the U.S. improved last month, while an increase in the number of Americans leaving the workforce helped push the jobless rate down to 8.6 percent, the lowest level since March 2009.

Employment climbed by 120,000 workers in November, with more than half the hiring coming from retailers and temporary help agencies, after a 100,000 gain the prior month.

Most stocks rose, capping the biggest weekly rally since March 2009 in the Standard & Poor’s 500 Index. (SPX) The S&P 500 gained 7.4 percent this week. The yield on the benchmark 10-year Treasury note fell to 2.04 percent yesterday from 2.09 percent late the previous day. 

Europe Crisis 

There were also signs Europe’s troubles may be starting to ease. A European proposal to channel central bank loans through the International Monetary Fund may deliver as much as 200 billion euros ($270 billion) to fight the debt crisis.

Europe’s debt crisis has been a source of uncertainty on the outlook for the U.S. economy, prompting companies such as DirecTV (DTV) to keep a tight rein on spending and employment.

Household Survey

The unemployment rate, derived from a separate survey of households, was forecast to hold at 9 percent. The decrease in the jobless rate reflected a 278,000 gain in employment at the same time 315,000 Americans left the labor force.

“While the rate is certainly a very favorable rate, I would highlight that a lot of it is because people pulled out of the workforce.

Obama said the drop in the jobless rate is a sign the recovery is getting stronger, and extending a cut in the payroll tax will provide more fuel for the economy.

Energy Efficiency 

Employment at service-providers increased 126,000 in November, including a 50,000 gain in retail trade as companies began hiring for the holiday shopping season. The number of temporary workers increased 22,300.

Macy’s Inc. (M), the second-biggest U.S. department-store chain, increased mostly part-time staff by 4 percent for the November-December shopping season. See’s Candies Inc., a chocolate maker owned by Berkshire Hathaway Inc would would add 5,500 mostly temporary workers.

Private hiring, which excludes government agencies, rose 140,000 after a revised gain of 117,000. Still, factory payroll growth slowed and construction employment dropped.

Government payrolls decreased by 20,000 in November, including a 16,000 decline on the state and local levels.

Limited Wage Gains 

 

Even as payrolls grow, limited wage gains are restraining consumers’ ability to boost spending, which accounts for about 70 percent of the economy. Average hourly earnings fell 0.1 percent to $23.18, yesterday’s report showed. The average work week for all workers held at 34.3 hours.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 15.6 percent from 16.2 percent.

The report also showed an increase in long-term unemployed Americans. The number of people unemployed for 27 weeks or more climbed as a share of all jobless to 43 percent from 42.4 percent.

Whether the swoon in the unemployment rate is legitimate or not, the doves on the Fed have just been sidelined from advocating QE3, at least for the next few months. (Bloomberg)