WASHINGTON – The U.S. job market has been recovering fitfully for three years. Now, its 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 4 1/2 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.
Its 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 this month.
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 Feds bond purchases have been intended to keep borrowing rates low.
Still, the report contained some sour notes: Many Americans are still avoiding the job market, neither working nor looking for work. Thats 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 Americas 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.
The jobs report follows other positive news. The economy expanded at an annual rate of 3.6 percent in the July-September quarter, the fastest growth since early 2012, though nearly half that gain came from businesses rebuilding stockpiles. Consumer spending grew at its slowest pace since late 2009.
But if hiring continues at its current pace, a virtuous cycle will start to build: More jobs typically lead to more pay, more spending and faster growth.
That said, more higher-paying jobs are needed to sustain the economys momentum. Roughly half the jobs that were added in the six months through October were in four low-wage industries: retail; hotels, restaurants and entertainment; temp jobs; and home health care workers.
Consumers have been willing to spend on big-ticket items. Autos sold in November at their best pace in seven years, and new-home sales in October bounced back from a summer downturn.
But early reports on holiday shopping have been disappointing. The National Retail Federation said sales during the Thanksgiving weekend – probably the most important stretch for retailers – fell for the first time since the group began keeping track in 2006.