Jobless rate in US falls to 5-year low

WASHINGTON — The American jobs picture brightened last month as hiring in the United States was stronger than expected and the unemployment rate fell to a five-year low — data that increases the likelihood that the Federal Reserve will begin easing its stimulus efforts sooner, rather than later.

Non-farm payrolls rose 203,000 last month, the Labor Department said yesterday, beating economists’ forecast of a 180,000 increase. September and October payroll numbers were also revised up by a combined 8,000.

The unemployment rate dropped three-tenths of a percentage point to 7 per cent, the lowest since November 2008, against expectations of a 7.2 per cent reading.

Stocks jumped in early New York trade as investors cheered the implications of the robust job report for corporate earnings and consumer spending, even while the data increases the odds that the Federal Reserve will soon slow the pace of its US$85 billion (S$107 billion) monthly bond purchases. About 10 minutes after the opening bell, the Dow Jones Industrial Average was up 0.7 per cent.

Mr Michael Marrale, Head of Research, Sales and Trading at ITG in New York, said: “I don’t think the Fed is in a big rush to do anything drastic in the absence of inflation. A few strong job numbers do not mean we are out of the woods.”

“That said, we are in a very good spot and we can offset growth with tapering and we come out of this in one piece,” he added.

At their October meeting, Fed policymakers were looking to end the programme “in the coming months”. Started last year, it is designed to keep long-term interest rates low, boost investment and spur hiring.

The officials next meet on Dec 17-18.

Other data yesterday showed consumer spending increased 0.3 per cent in October after rising 0.2 per cent in September. Economists had expected consumer spending, which accounts for about 70 per cent of US economic activity, to gain 0.2 per cent.

Last month, the unemployment rate fell as the number of job seekers rose and government workers furloughed during the October shutdown returned to work. The jobless rate has fallen steadily since September last year, when the Fed launched its bond-buying programme.

The job gains last month were broad-based: Private companies added 196,000 jobs, accounting for most of the increase, while government payrolls also rose as hiring by state and local governments offset a decline in federal employment.

Manufacturing payrolls increased 27,000, rising for a fourth straight month. Construction employment advanced 17,000, adding to October’s gains although the housing recovery slowed.

Retail employment slowed, adding 22,300 last month compared to 45,800 in October. A late Thanksgiving holiday could have resulted in some seasonal hiring not being captured in the report.

Average earnings rose by 4 US cents to US$24.15 an hour, while the average workweek increased 0.1 hour to 34.5 hours, which means more money in consumers’ pockets. AGENCIES