US jobless rate drops to five-year low
US employers hired more workers than expected last month and the jobless rate fell to a five-year low of 7 per cent, which could fan speculation the Federal Reserve could start reducing its bond purchases this month.
The labour department said yesterday nonfarm payrolls rose 203,000. The jobless rate fell 0.3 percentage point to its lowest level since November 2008 as some federal workers, who were counted as jobless in October, returned to work after a 16-day shutdown of the government.
Economists had forecast payrolls rising 180,000 last month and the unemployment rate falling to 7.2 per cent.
Stocks jumped in early trading following the data, the market rising for the first time in six days. The Standard & Poor's 500 index rose 0.9 per cent to 1,800 points in early trading while the Dow Jones Industrial Average gained 0.8 per cent to 15,963. The Nasdaq composite climbed 0.7 per cent, to 4,062.
Job gains for September and October were revised to show 8,000 more created than previously reported, lending strength to the report. Other details were also positive, with employment gains across the board, hourly earnings rising and the workweek lengthening.
In addition, the jobless rate fell even as the participation rate - the share of working-age people who either have a job or are looking for one - bounced back from a 351/2-year low reached in October.
The closely watched employment report comes before the Fed's December 17-18 policy-setting meeting.
The stronger-than-expected reading on job growth could stir speculation the central bank might reduce its current pace of bond purchases this month, but most economists feel it will want further signs of progress before acting.
Minutes from the central bank's last meeting in October showed officials were preparing to scale back their US$85 billion monthly bond-buying campaign in coming months as long as the economy continues to improve.
Economic data so far for the fourth quarter has been mixed, with labour market and consumer spending indicators firming. However, the housing market and business spending slowed.
Economists believe the central bank will probably not want to pull the trigger before lawmakers strike a deal to fund the government.
While a few economists look for the Fed to scale back its purchases this month or next, most expect it will hold off until March.