Jobless rate in the US falls to lowest in five years

US employers hired more workers than expected in November and the jobless rate fell to a five-year low of 7.0 per cent, raising chances the Federal Reserve will start ratcheting back its bond-buying stimulus sooner rather than later.

Non-farm payrolls increased by 203,000 new jobs last month, the Labor Department said yesterday.

The unemployment rate dropped three tenths of a percentage point to its lowest level since November 2008 as some federal employees who were counted as jobless in October returned to work after a 16-day partial shutdown of the government.

Hide Ad
Hide Ad

Economists had forecast payrolls rising only 180,000 last month and the unemployment rate falling to 7.2 per cent from 7.3 per cent.

Job gains for September and October were revised to show 8,000 more jobs created than previously reported, lending more strength to the report.

Other details were also upbeat, with employment gains across the board, average hourly earnings rising and the work week lengthening.

In addition, the jobless rate fell even as the participation rate – the share of working-age Americans who either have a job or are looking for one – bounced back from a 35-and-a-half-year low touched in October.

Hide Ad
Hide Ad

“The US labour market is still far from healed, but it certainly is moving in the right direction,” said Eric Stein, co-director of the Global Income Group at Eaton Vance Investment Managers in Boston.

US stocks rallied and the dollar rose against the yen on the data. US benchmark Treasury yields hit a three-month high as traders increased bets the Fed could reduce its bond purchases as early as its next meeting on December 17-18, though they later eased back.

The central bank has been buying $85bn in Treasury and mortgage-backed bonds each month to hold long-term borrowing costs down in a bid to spur a stronger economic recovery.

Despite the jobs data, many economists said the central bank was still likely to hold off reducing its purchases until January or March to ensure the economy was on solid ground.

Hide Ad
Hide Ad

“This number puts a December taper on the table, but it isn’t a certainty,” said Stein.

Improving labour market prospects buoyed consumer confidence in early December. The Thomson Reuters/University of Michigan’s preliminary consumer sentiment index jumped to 82.5 from 75.1 in November, a separate report showed.

Economic data so far for the fourth quarter have been mixed, with labour market and consumer spending indicators firming. However, the housing market and business spending have slowed.

Economists believe the Fed will probably not want to pull back on its stimulus before lawmakers on Capitol Hill strike a deal to fund the government.

That could come as soon as next week, however. Congressional aides have said negotiators were down to the final details as they tried to close in on a deal.

Related topics: