U.S. unemployment at its lowest since March ’09

‘Something good is stirring in the U.S. economy’

By

Published:

 

WASHINGTON — The unemployment rate, which has refused to budge from the 9 percent neighborhood for two and a half frustrating years, fell sharply in November, driven in part by small businesses that finally see reason to hope and hire.

Economists say there is far to go, but liked what they saw.

The rate fell to 8.6 percent, the lowest since March 2009, two months after President Barack Obama took office. Unemployment passed 9 percent that spring and had stayed there or higher for all but two months since then.

The country added 120,000 jobs in November, the Labor Department said Friday. Private employers added 140,000 jobs, while governments cut 20,000.

The economy has generated 100,000 or more jobs five months in a row — the first time that has happened since April 2006, well before the Great Recession.

“Something good is stirring in the U.S. economy,” Ian Shepherdson, an economist at High Frequency Economics, said in a note to clients.

The stock market rallied on opening, after the report came out, but finished flat for the day, up 787 points for the week. The only weeks with bigger point gains were in October 2008, when stocks lurched higher and lower during the financial crisis.

Unemployment peaked at 10.1 percent in October 2009, four months after the Great Recession ended. It dipped to 8.9 percent last February and 8.8 percent last March but otherwise was at or above 9 percent.

300,000 gave up

The rate fell not just because people found jobs. About 300,000 people simply gave up looking for work, and were no longer counted as unemployed. People routinely enter and leave the workforce, though 300,000 is more than usual.

The underemployment rate, though, fell to 15.6 percent from 16.2 percent. That includes three groups: people who are unemployed and looking for work, people who are unemployed and have stopped looking, and people who are working part-time but want full-time work.

Obama, who faces a re-election vote in less than a year and a presidential campaign that will turn on the economy, seized on the decline to argue for expanding a cut in the tax that workers pay toward Social Security.

The tax cut affects 160 million Americans. It lowers a worker’s Social Security tax by up to $2,136 a year. Someone earning $50,000 a year saves $1,000 with the tax cut. It will expire Dec. 31 unless Congress acts.

Republicans and Democrats have supported an extension but differ on how to pay for it. The Senate defeated plans from both parties Thursday. Republicans had proposed paying for the cut by freezing the pay of federal workers through 2015. Democrats wanted to raise taxes on people making $1 million or more a year. A majority of Republicans voted against both versions of continuing the tax cut.

“Now is not the time to slam the brakes on the recovery. Right now, it’s time to step on the gas,” Obama said Friday.

Inside the unemployment report, one of the most closely watched indicators of the economy’s health, were signs of improvement for small businesses, which employ 500 or fewer people and account for half the jobs in the private sector.

The government uses a survey of mostly large companies and government agencies to determine how many jobs were added or lost each month. It uses a separate survey of households to determine the unemployment rate.

The household survey picks up hiring by companies of all sizes, including small businesses and companies just getting off the ground. It also includes farm workers and the self-employed, who aren’t included in the survey of companies.

The household survey has shown an average of 321,000 jobs created per month since July, compared with an average of 13,000 the first seven months of the year.

When the economy is either improving or slipping into recession, many economists say, the household survey does the better job of picking up the shift because it checks small businesses.

The National Federation of Independent Business, a small business group, said Friday that its own survey of small companies in November found that more of them are planning to add workers than at any time since September 2008, when the financial crisis struck.