Friday's better-than-expected unemployment report could be positive news for holiday retail sales, but some economists say the jobless rate could still go higher.
The Labor Department reported Friday that the nation's unemployment rate fell to 10 percent in November, and employers cut just 11,000 jobs — fewer than at any time since the start of the recession. The figure represents a decline from October's 10.2 percent, which set a 26-year high. The department also said that 159,000 fewer jobs were lost in September and October than previously reported.
President Obama, speaking in Allentown, Pa., called it the "best jobs report we've seen since 2007."
"This is good news, just in time for the season of hope," he said. "But I want to keep this in perspective. We still have a long way to go."
Christina Romer, the chairman of the White House Council of Economic Advisers, said the report is "the most hopeful sign yet ... of improvement in the labor market."
"It is by far the closest we have been to stable employment since the recession began almost two years ago," she said.
November's unemployment decline was a surprise to most economists, who predicted it would hold steady for the month. The data were the strongest since December 2007, the official start of the recession, the last time payrolls have seen an increase.
"The decline in the unemployment rate, the loss of jobs at a much slower pace than we'd expected, were big, big surprises and should be positive news not only for the Obama administration but also the financial markets generally," Hugh Johnson, an analyst with Johnson Illington Advisors, told NPR.
Stock prices surged in early trading following the release of the jobs numbers. At midmorning, the Dow Jones industrial average was up 120 points, a little more than 1 percent, to 10,484.84, and the S&P 500 stock index was up 14 points, 1.3 percent, to 1,114.
Manufacturing Demand Picks Up
The positive economic news did not stop with the jobs report. Orders to U.S. factories unexpectedly rose in October, the sixth gain in the past seven months, the Commerce Department said Friday.
Orders rose 0.6 percent in October, much better than the flat reading that economists had expected. A jump in demand for commercial aircraft and petroleum products led the gain.
Orders for durable goods, items expected to last three years, climbed 0.6 percent. Orders for nondurable goods rose 1.6 percent, propelled by gains in demand for petroleum, chemicals, plastics and food.
The professional and business services sectors added 86,000 jobs — including 52,400 temporary positions, while the service sector increased payrolls by 58,000 and health services added 40,000 jobs. The construction sector, hard hit by the residential and commercial real estate slump, shed 27,000 jobs.
Will Temporary Jobs Turn Permanent?
Economists generally believe that an increase in temporary jobs is a precursor to adding more permanent slots.
"If you look at the details of the report, business is getting better. And although employers are hiring permanent workers yet, they are still trying to meet that demand by hiring temporary help," Johnson said.
"Sooner or later … those temporary jobs will become permanent jobs," he said.
Analysts also predict employers will increase hours for existing employees before hiring new ones. November saw the average workweek extended to 33.2 hours from a record low of 33 hours in October.
The positive economic news comes a day after Obama hosted a jobs summit at the White House, where he told economists, business executives and union leaders that he is "open to every demonstrably good idea" to create jobs. Obama is also scheduled to deliver a speech on the economy Tuesday morning.
Democrats in Congress are also considering a $100 billion extension to unemployment benefits for those workers who are about to see them run out.
Alan Levinson, chief economist at T. Rowe Price in Baltimore, said the unemployment rate is unlikely to firm up a downward trend until the economy is adding about 110,000 jobs a month.
"I think the unemployment rate is going to drift up again next year," he said.
Part of that is due to the fact that more people have given up looking for work. The size of the labor force, which includes the employed and those actively searching for jobs, fell by nearly 100,000, the third straight decline.
Hope For The Holidays
But the psychological value of a dip in unemployment could help bolster holiday retail sales, as Americans become a bit less concerned about losing their jobs, said Brian Westbury, chief economist with First Trust in Chicago.
"I look for better than consensus, better-than-expected holiday shopping," he told NPR. "If you look back at this past year, it's clear that people held back and their savings went up. As a result, there's a lot of dry powder, so to speak, on the sidelines."
But tight credit remains a concern, and Obama on Friday prodded banks to increase lending, reminding them of the $700 billion government bailout of the financial industry.
"The taxpayers were there for you to clean up your mistakes," he said at his appearance in Pennsylvania. "You now have a responsibility to be there for the community."
