U.S. adds 200,000 jobs in Dec.; unemployment drops to 8.5%

The nation’s gloomy jobs picture continued to brighten in December as employers added 200,000 jobs, pushing the unemployment rate down to 8.5 percent, the Labor Department reported Friday.

Private employers added 212,00 jobs, moving the total of private-sector jobs created in 2011 to 1.9 million. Governments, particularly at the local level, cut jobs — 12,000 last month — holding overall job growth for the year to 1.6 million.

Still, the jobless rate has declined by 0.6 percent since August, and it now stands at its lowest level in nearly three years.

The improvement in the labor market is welcome news for President Obama, who has been widely criticized for the nation’s poor labor market. With the 2012 presidential campaign intensifying, Obama has struggled to win public approval for his handling of the economy, and steady job creation can only boost his political standing.

Speaking at the Consumer Financial Protection Bureau while introducing Richard Cordray as the new director, Obama used the report to promote the payroll tax cut extension as a factor in job creation.

“This morning we learned that American businesses added another 212,000 jobs last month. All together more private-sector jobs were created in 2011 than any year since 2005,” Obama said. “There are a lot of people that are still hurting out there, after losing more than 8 million jobs in the recession. Obviously, we have a lot more work to do. But it is important for the American people to recognize we added 3.2 million new private-sector jobs in the last 22 months, nearly 2 million new jobs last year alone....

“One of reasons is the tax cut we put in place last year,” Obama said. “When Congress returns, they should extend the payroll tax cut all year. There should not be delay, there should not be a lot of drama.”

The report showed solid gains across employment sectors, with the hard-hit construction industry adding 17,000 jobs, retailers adding nearly 28,000, transportation firms hiring 50,000 workers, and manufacturers adding 23,000 jobs.

The nation’s factories have added 334,000 jobs since December 2009 — about 13 percent of what was lost during the recession — marking the first sustained increase in manufacturing employment since 1997, according to the Bureau of Labor Statistics.

The upbeat jobs report capped an up-and-down 2011 for the U.S. labor market.

After brisk growth in the beginning of the year, job growth stalled in the wake of higher energy prices, the Japanese earthquake and the political fight over raising the nation’s debt limit. But the job market improved significantly in the final months of the year.

Even with the positive report, stubborn problems remain. Some 5.6 million Americans — 42.5 percent of the unemployed — have been jobless for more than six months, a figure that was unchanged in December.

Also, minority joblessness remained at catastrophic levels: The black unemployment rate was 15.8 percent in December, and the jobless rate for Hispanics was 11 percent.

“This is a step in the right direction,” said Heidi Shierholz, an economist at the Economic Policy Institute. “However, it is important to note the context: The jobs deficit left from losses in 2008/2009 remains well over 10 million jobs; even at December’s growth rate, it would still take about seven more years — until around 2019 — to fill the gap.”

House Speaker John Boehner (R-Ohio) cheered the report, even as he noted that the nation’s labor market remains troubled.

“It’s good news that more Americans found work last month despite a sluggish economy, but both parties must come together and do more to address the ongoing uncertainty that small businesses face,” he said in a statement. “Today marks the 35th consecutive month of unemployment above eight percent, and too many Americans continue to struggle to find their next job.”

Senate Majority Leader Harry Reid (D-Nev.) echoed the president in using the report to push for extending the payroll tax cut through 2012.

“Creating jobs must continue to be Congress’s top priority. While the economy has shown signs of improvement, that is no consolation for the millions of Americans who are out of a job and struggling to make ends meet in Nevada and across the country,” Reid said. “The first thing the Senate must do to strengthen our economy is extend the payroll tax cut for the remainder of this year. This middle-class tax cut is vital for 160 million American workers who count on this money to help them put food on the table and heat their homes this winter.”

U.S. markets opened mostly lower despite the strong labor report. But in Europe, the major indexes were up.

The report revised the November unemployment rate to 8.7 percent from an initial report of 8.6 percent, while adjusting the number of new jobs added that month from 120,000 to 100,000.

The jobs report builds on a several new indicators pointing toward an economy on the upswing.

The government reported Thursday that claims for unemployment benefits declined in the final week of December, moving the average during the past four weeks to its lowest level in more than three years.

Auto sales in December were up, continuing their substantial improvement from the summer. And for all of 2011, vehicle sales rose 10 percent.

On Thursday, several analysts cautioned not to make too much of the good news too soon.

Bernard Baumohl, chief economist for the New Jersey-based Economic Outlook Group, said that regardless of what happens with the December unemployment number, the economy faces major hurdles in 2012.

Europe’s economy is teetering on the edge of recession, and China’s roaring economy is beginning to cool, he said, developments that pose substantial risk to U.S. economic and employment growth. In addition, he said, oil prices are likely to rise next year as tension increases in the Persian Gulf and the broader Middle East.

Meanwhile, he added, business and individual consumers are likely to cut back, after a relative spending binge that helped increase economic growth by an estimated three percent in the final months of 2011. “The recent uptick in shopping, while cathartic, is simply unsustainable,” the firm wrote in its 2012 economic forecast.

Any or all of those factors could slow job growth in the early months of 2012.

“I have my concerns that the pace of job growth will likely slow in the first half of this year as the economy slows,” Baumohl said. “We just do not have a basis for optimism that the economy or job market has turned the corner.”

Staff writers Felicia Sonmez and David Nakamura contributed to this report.


Michael A. Fletcher is a national economics correspondent, writing about unemployment, state and municipal debt, the evolving job market and the auto industry.
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