Jobless Rate Rises to 9.8 Percent As Job Growth Slows

December 3, 2010 - 12:55 PM

Washington (AP) - In a surprising setback, the nation's unemployment rate climbed to 9.8 percent in November, a seven-month high, as hiring slowed across the economy.

Employers added only 39,000 jobs last month, a sharp decline from the 172,000 created in October, the Labor Department reported Friday. The weakness was widespread. Retailers, factories, construction companies, financial firms and the government all cut jobs last month.

The disappointing figures caught economists off guard. They had predicted the addition of 150,000 jobs, based on a raft of positive reports that showed busier factories, rising auto sales and a good start to the holiday shopping season in November. Yet all that failed to translate into mass hiring.

Contributing to the surprisingly scant job gains in Friday's report was the difficulty the government had in adjusting for seasonal factors, economists said. The government's seasonal adjustments took account of the previous two Novembers in calculating last month's employment numbers. Hiring during the past two Novembers was highly volatile, which made the task harder than usual.

Joel Naroff, president of Naroff Economic Advisors, said December's employment figures would probably show a rebound.

"We shouldn't panic," Naroff said. "In any recovery, it is not smooth sailing."

Investors on Wall Street seemed unrattled by the job figures. The Dow Jones industrial average fell about 10 points in early trading, after two days of strong gains.

Still, the report was a reminder that the economic recovery is proceeding more slowly and fitfully than many economists had expected. It is likely to push lawmakers before year's end to pass an extension of long-term unemployment benefits, which expired this week.

"November's U.S. employment report is a painful reality check for those hoping that a meaningful acceleration in economic activity was under way," said Paul Dales, U.S. economist for Capital Economics. "The truth is that the economy is going nowhere at a time when companies are not willing to boost hiring."

Private companies -- the backbone of the economy -- created only 50,000 jobs. That was down significantly from the 160,000 private-sector jobs created in October and was the smallest gain since January.

With hiring so weak, the unemployment rate rose from 9.6 percent to 9.8 percent. The jobless rate has now topped 9 percent for 19 straight months, the longest stretch on record.

Other reports out Friday offered mixed signals for the economy:

-- The service sector, which employs approximately 80 percent of the U.S. work force, expanded for the 11th straight month in November and at the fastest pace in six months. The Institute for Supply Management says that its service-sector index rose to 55 last month from 54.3 in October. It was the highest reading since May. Any figure over 50 indicates growth.

-- Orders to U.S. factories fell in October by the largest amount in five months, reflecting a sharp drop in demand for aircraft, the Commerce Department said. Excluding the transportation equipment, orders were down a smaller 0.2 percent.

There were 15.1 million people unemployed in November.

Adding those unemployed people to others who are working part time but would prefer full-time jobs and those who have given up looking for work, 17 percent of the labor force is "underemployed." That was the same as October. Still, the figure remains close to a record high set last year.

Another grim figure: There was a record 1.3 million "discouraged" workers in November. Those are persons not currently looking for work because they believe no jobs are available to them.

Last month, retailers slashed 28,100 jobs. Factories sliced 13,000. Financial firms cut 9,000 and construction companies trimmed 5,000. The public sector eliminated 11,000 positions, mostly reflecting cuts from local governments.

Those adding jobs: health care, with 19,000 new positions, mostly at hospitals. Temporary-help firms added 40,000 jobs, educational services companies added 6,200 positions, and leisure and hospitality expanded payrolls by 11,000.

The economy needs to add at least 120,000 jobs to prevent the unemployment rate from rising. To reduce the unemployment rate significantly, monthly job creation has to be a lot stronger -- up to 300,000 new jobs a month.

Economists say it could take until near the end of this decade to drop the unemployment rate to a more normal 6 percent.

Before the lame-duck Congress adjourns later this month, lawmakers are expected to pass legislation renewing aid to the unemployed.

Extended benefit programs that provide up to 99 weeks of extra aid to the unemployed expired at the end of November because Congress failed to extend them. Nearly 2 million stand to lose unemployment benefits as the holiday arrives.