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Business

Jobless rate falls to 10 percent, job losses narrow to 11,000

Latest update : 2009-12-04

Figures released on Friday show the US employment rate surprisingly fell to 10 percent. Yet, the worst employment crisis in 26 years will pose a further challenge to Barack Obama's plans for sustained economic recovery.

AFP - The US labor market saw a dramatic improvement in November as the number of jobs lost narrowed to 11,000 and the unemployment rate dipped to 10.0 percent, official data showed Friday.

The Labor Department figures showed a massive improvement from October and earlier months, suggesting the economy is nearing job growth needed to sustain a fragile recovery.

"This is another signpost that the recession is over, even if a vigorous recovery is not yet assured," said Avery Shenfeld, senior economist at CIBC World Markets.

"We're still quite a way from the 150,000 jobs a month and above to consistently bring the unemployment rate down. But I think we will start to see some positive net hiring in the first quarter and that will serve as a buttress against a drop back into recession."

The Labor Department revised its data from the prior two months to show fewer job loses than earlier estimated -- 111,000 losses in October instead of 190,000 and 139,000 in September instead of 219,000.

The report was far better than analyst expectations for a loss of 125,000 jobs and a jobless rate unchanged from October at 10.2 percent.

"This report, despite its unevenness, will likely create some real euphoria in the investor community," said Joel Naroff at Naroff Economic Advisors.

"It is the first time we can start thinking that the job situation may be turning around with some gusto."

The report showed the goods-producing sectors lost 69,000 jobs including 41,000 in manufacturing and 27,000 in construction.

But services -- which represents the largest number of jobs -- saw growth of 58,000 jobs. Within services, retail trade lost 15,000 jobs but professional and business services added a hefty 86,000 while education and health services saw an increase of 40,000.

Weekly hours worked, sometimes seen as a proxy for economic activity, increased by 0.6 percent, while average hourly earnings rose 0.1 percent.

Sophia Koropeckyj at Moody's Economy.com said the increase in hours worked is "a good cyclical indicator."

"It is expected that employers will first extend hours before taking on new workers. This is a good first step," she said.

But she said wage growth was sluggish and that "this has implications for consumer spending, which accounts for two-thirds of overall spending in the economy. In addition, the labor force participation rate is at a 24-year low."

The report showed the labor force fell by 98,000 with so-called discouraged workers stopping their search for work, a factor that lowers the unemployment rate.

The employment picture remained weak in economically critical sectors such as retailing, manufacturing and construction, some noted.

"Where we saw gains was in temporary workers, education and health care," Naroff said.

"While the small drop in employment is good news, it is not clear that we are poised to see any major increase in payrolls anytime soon."

The US economy grew a 2.8 percent annual pace in the third quarter, reversing four quarters of contraction in the worst recession in decades.

Yet many economists argue the recovery could be imperiled by high unemployment, by limiting consumer incomes and hurting confidence and spending.

Date created : 2009-12-04

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