By Michael A. Fletcher
Washington Post Staff Writer
Wednesday, December 1, 2010; 10:47 PM
Stocks rallied broadly Wednesday as a series of encouraging economic reports in the United States and a successful bond sale in Portugal boosted investor confidence and propelled Wall Street to its biggest gains in two months.
The Dow Jones industrial average surged 2.3 percent to close at 11,255.78, while the Standard & Poor's 500-stock index jumped 2.2 percent, to 1206.07. The technology-heavy Nasdaq composite index closed at 2549.43, up 2 percent.
The rally was fueled by a report from ADP Employer Services showing that private employers added workers in November at the fastest clip in three years, spurring optimism that the economy is embarking on a robust period of job growth.
"We have gone through these phases from where we were losing jobs, to where employment was holding steady, to a point now that suggests that some hiring has started," said Joel Prakken, chairman of Macroeconomic Advisers, an economic forecasting firm. "This is the direction in which we need to go, and I expect this will pick up in the spring of next year."
The encouraging jobs data coincided with a reports showing continued growth in the manufacturing sector and construction spending, as well as news that the debt-burdened Portuguese government successfully sold bonds.
But even the accelerated job creation is far from enough to significantly lower the nation's 9.6 percent unemployment rate anytime soon. Meanwhile, an estimated 800,000 Americans lost their unemployment benefits Wednesday, as Congress failed to extend emergency jobless aid to workers who have exhausted the six months of payments offered by states.
Advocates said 2 million unemployed workers could lose assistance by the end of the year if Congress fails to restore emergency unemployment insurance, which allows people to collect up to 99 weeks of jobless benefits. The government says that 6.2 million of the nation's nearly 15 million unemployed workers have been out of a job for at least six months.
"This is a moment to take stock of the crisis for millions of Americans who want to work but can't find jobs," said Christine Owens, executive director of the National Employment Law Project, which advocates for the jobless.
The plight of the long-term unemployed underscored the deep economic hole the nation has fallen into since the downturn took hold in late 2007. Even as private employers quicken their pace of job creation, many hard-pressed state and local governments are expected to shed jobs in the coming months as federal stimulus aid tapers off.
Analysts said it its likely to take five years - and perhaps longer - before the nation returns to what economists consider full employment, which is a jobless rate of 4 to 5 percent. The Labor Department is scheduled Friday to release its November jobs report, which some analysts predict will show that employers added 150,000 jobs last month.
"In order to get to the pre-recession unemployment rate in five years we need to create 300,000 jobs a month," said Heidi Shierholz, a labor market economist at the Economic Policy Institute, which has lobbied for more government stimulus to fuel the recovery. "That 150,000 will do it, but very, very slowly."
The Federal Reserve on Wednesday released a national economic snapshot which showed more robust hiring, a hopeful retail picture and an modest expansion of manufacturing between mid-October and mid-November.
The "beige book" report is based on anecdotal data collected by economists in the Fed's 12 regions. Overall, it pointed to an economy that seemed to be gaining steam once again. That would be welcome news after tepid summer growth led some analysts to worry that nation was sliding toward a double-dip recession or a long period of painfully slow growth.
Concerns about the recovery prompted the bank to announce last month plans to buy $600 billion in Treasury bonds, an action aimed at stoking the economy. That sparked a backlash from foreign governments that called the move a direct effort to weaken the dollar, which would make U.S. exports cheaper.
The Fed's action also prompted the ire of some Republican lawmakers, who viewed it as enabling government expansion by making borrowing easier.
John Makin, a resident scholar at the American Enterprise Institute, said the good economic news is welcome, even if the data is likely to fluctuate in the coming months.
"We had some good numbers and the stock market went up. But we're still not back to the highs of early November," he said. "And there is going to be a lot of headline risk out of Washington," meaning that the direction of the economy will depend in part on what Congress does about unemployment, the deficit and taxes.