Employment ducks Superstorm Sandy's punch

WASHINGTON Fri Dec 7, 2012 5:01pm EST

People wait in line to enter a job fair in New York April 18, 2012. REUTERS/Shannon Stapleton

People wait in line to enter a job fair in New York April 18, 2012.

Credit: Reuters/Shannon Stapleton

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WASHINGTON (Reuters) - Companies kept up their slow but steady hiring pace in November, defying predictions that Superstorm Sandy would deal a big blow to the labor market.

While the unemployment rate fell to a near four-year low of 7.7 percent, that was only because many Americans gave up the hunt for work, tempering the signal from the stronger-than-expected payrolls growth.

A big drop in consumer confidence in December, the largest fall in more than 1-1/2 years, also offered a cautionary note on the economy's health.

Non-farm employment expanded by 146,000 jobs last month after gaining 138,000 in October, the Labor Department said on Friday. The increase was well above the 93,000 expected on Wall Street.

"We are moving in a trend-like modest job-growth environment," said Michael Hanson, a senior economist at Bank of Bank of America Merrill Lynch in New York. "We really need to see payroll numbers break above 200,000 for a while to think we have a more sustained recovery under way."

The government said Sandy, which slammed the densely populated East Coast in late October, did not have a substantive impact on the data. Economists had thought it would, with some predicting it would cut up to 75,000 jobs off payrolls growth.

Nevertheless, the storm did hit the economy hard.

Sandy knocked retail sales and industrial output in October and led to a big spike in claims for jobless benefits, one of the reasons economists expected job growth to slow.

A Labor Department survey of households found 369,000 workers were unable to make it to work in the aftermath of the storm and a further 1.1 million ended up working only part time. However, the department still considered them employed.

The stronger-than-expected payrolls number helped to push down prices for U.S. Treasuries, but lifted the dollar against a basket of currencies. The Dow Jones industrial average and the Standard & Poor's 500 Index ended Friday's session moderately higher, but a steep drop in Apple's stock once again forced the Nasdaq Composite Index to end the day in negative territory.


November's job gains left them just below the monthly average of 151,000 that has prevailed since January.

Economists consider that pace just enough to push the jobless rate lower over time. But they say roughly 200,000 to 250,000 jobs per month would be needed to make noticeable headway in absorbing the 22.7 million Americans who are either jobless or underemployed.

The 0.2 percentage point drop in the unemployment rate, which took it to its lowest level since December 2008, was due to a decrease in the size of the labor force, a suggestion that frustrated Americans were giving up the hunt for work.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell back to near a 31-year low.

Heidi Shierholz, an economist at the Economic Policy Institute in Washington, said it could take more than 10 years for the unemployment rate to drop back to its pre-recession level of around 5 percent at the current pace of job growth.

Last month, the retail sector accounted for more than a third of jobs gains, which economists tied to a brisk start to the holiday shopping season. Still, private hiring slowed to 147,000 from 189,000 in October, pulled down by a sharp decline in construction employment and weak manufacturing payrolls.


Employment continues to be held back by fears the government may fail to prevent the $600 billion in automatic tax hikes and government spending cuts set to take hold at the start of next year. The debt crisis in Europe has also weighed.

Worries about this so-called fiscal cliff hit consumer sentiment in early December. The Thomson Reuters/University of Michigan's preliminary confidence index plummeted 8.2 points to 74.5. It was the largest drop since March 2011.

"That confirms my belief that the only thing the economy has to fear is Washington itself," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

"There is some real underlying strength in the economy as the November jobs numbers indicate, but it could be wiped out by the games being played by our political representatives."

With the labor market far from full health, Federal Reserve policymakers, who meet on Tuesday and Wednesday, look certain to keep U.S. monetary policy on its current ultra-easy course.

Economists said an anticipated tightening of fiscal policy next year, even if a deal is reached to avoid completely going over the fiscal cliff, provides ample reason for the U.S. central bank to maintain its stance.

The retail sector added 52,600 jobs last month after rising 50,900 in October. The pace of retail hiring over the last three months was the fastest since 1995.

There were also increases in information and temporary help hiring. But transport, financial, education and health services employment slowed. Manufacturing employment fell 7,000, marking the third month it has dropped this year.

Construction payrolls surprisingly tumbled 20,000, despite a surge in homebuilding, which is benefiting from the Fed's effort to hold borrowing costs down. Economists said they expect construction jobs to rise in the coming months as the housing recovery returns full swing.

Average hourly earnings increased 4 cents. In the 12 months through November, average hourly earnings are up just 1.7 percent, underscoring the trouble that workers are having keeping up with inflation.

(Additional reporting by Richard Leong in New York; Editing by Andrea Ricci, Tim Ahmann, James Dalgleish and Jan Paschal)

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Comments (44)
IamBAD1 wrote:
So….more people have moved from searching for a job to working full time in the tax free zone of the “gray market”.

Dec 07, 2012 8:43am EST  --  Report as abuse
olepcola wrote:
So the economy is getting better and fewer people are looking for work. Isn’t that what happens when you get a job, you stop looking for work. 10,000 people reach retirement age each day, so they too stop looking. The rate is 7.7 and I feel good.

Dec 07, 2012 9:00am EST  --  Report as abuse
AlexZ83 wrote:
Well, a lot of us Romney-droids claimed the job numbers for September and October were inaccurate (rigged in President’s favor), and the Obama-bots screamed back at us crying like little babies. Turns out we were right after all, ha? Welcome to the new and improved US economy, where in the next four years more and more people forget what work really looked like.

Dec 07, 2012 9:07am EST  --  Report as abuse
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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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