U.S. unemployment rate falls to 8.6%

Reporting from Washington —  For months, political analysts have been saying that President Obama’s reelection hopes hinge on the economy, with an unemployment rate of 9% or higher certain to pose serious problems for the White House.

On Friday, the Labor Department announced an unexpectedly sharp decline in the November unemployment rate, to 8.6% from 9% in October, raising hopes of an accelerated recovery.

But the numbers also touched off the kind of partisan reactions that are likely to shape the debate over the 11 months remaining before the presidential election.

Economists viewed the latest jobs report as largely positive, consistent with indications that the broader economy is picking up steam, albeit slowly and unevenly. But they cautioned against reading too much into the big drop in the jobless rate, given that it reflected a contraction in the labor force as much as job gains.

Obama hailed the report, saying the economy, despite facing “strong head winds,” has posted 21 consecutive months of job growth in the private sector. In November, businesses gained 140,000 jobs while public employers shed 20,000 from their payrolls.

Considering that millions of Americans remain unemployed, the White House was careful not to crow too much about the decline in the unemployment rate. “Signs of progress are good,” said White House Press Secretary Jay Carney, but “8.6% is way too high.”

Obama’s chief economic advisor, Alan Krueger, acknowledged that about half of the unemployment drop last month was attributed to 315,000 people leaving the labor force. Many of them were women who were probably discouraged by poor job prospects.

Seizing on that number, the Republican National Committee issued a statement saying that the U.S. had enough discouraged workers “to fill a city the size of Pittsburgh.” House Speaker John Boehner (R-Ohio) said “the jobless rate in this country is still unacceptable” — above 8% for the last 34 months.

Democratic analysts insisted the unemployment rate, the lowest since March 2009, could help brighten voters’ view of the economy.

“It helps with the ‘hope factor,’” said John Anzalone, a Democratic pollster who has worked for the president.

But it’s unclear where the jobless rate will be next August, considered a key month in solidifying voters’ decisions on candidates.

With November’s gains, job growth over the last three months has averaged 143,000 a month. That’s almost double the monthly average from May to August when the debt-ceiling turmoil in Washington and the supply chain disruptions from Japan’s natural disasters took a toll on stock markets, manufacturing and overall confidence.

The U.S. would need to create jobs at a faster pace, however, to make a sizable dent in the unemployment rate, given the expanding workforce population.

And that won’t happen unless the economy grows more quickly, something that remains highly uncertain given the European debt crisis, the still-depressed U.S. housing market and the potential for budget cuts to reduce the deficit.

Obama is making a push to extend the payroll tax cut that gave the average family a $1,000 break this year, as well as the federal emergency unemployment benefits. Failure to get one or both of them through Congress could have a significant effect on economic growth next year, analysts said.

For now, the White House is getting economic help from strong business investments, solid exports and surprisingly resilient consumer spending, as evidenced by the strong start to holiday shopping.

Retailers last month boosted their head counts by 50,000, the second-largest holiday hiring in November in a decade. More than half of those gains were at apparel and clothing accessory stores. Electronics retailers kicked in an additional 5,000 new hires.

“There’s pretty good momentum heading into the final weeks of the year,” said Shawn DuBravac, chief economist for the Consumer Electronics Assn.

But with consumer spending accounting for about 70% of the economy, administration officials worry that such spending might not hold up, considering the slow growth in jobs and incomes.

Friday’s Labor Department report showed that average hourly earnings for all private-sector employees was $23.18 — up just 1.8% from a year earlier, about half the pace of inflation.

One major factor in the slow growth of earnings is that the economy isn’t creating enough higher-paying jobs.

Besides retail, many of the other jobs created last month involved temporary help services and the leisure industry, namely hotels and restaurants. Much smaller gains came in such fields as computer engineering and accounting. Hiring in the information industry and financial services has been stagnant. Manufacturing payrolls in the last two months also have been flat.

“Private-sector job growth has been pretty steady,” said Ron Blackwell, chief economist for the AFL-CIO, noting that that doesn’t mean most Americans are doing well.

The inflation-adjusted weekly earnings of working-age men at the median — the midpoint — is 28% below what it was in 1969, he said, citing figures from the Brookings Institution’s Hamilton Project. “Basically, people are hurting,” he said.

Adriana Kugler, the Labor Department’s chief economist, said that there was more hiring under the radar, at new start-ups and family ventures, than what shows up in the monthly tally of jobs from employers.

“You’re not capturing the more dynamic aspects of businesses,” she said.

Kugler also pointed out that less than 5% of the jobs created in the last year paid minimum wage or below.

Cathy Fast of West Des Moines, Iowa, is unemployed but may be among the swelling group of people who are counted as having dropped out of the labor force.

After getting laid off from an engineering firm in August 2008, the 56-year-old looked intensely for another job. But all she could find was part-time and temporary work. “You just get sort of discouraged after awhile,” she said.

Fast, a college graduate with two young adult children and a husband with a secure job, hasn’t given up. She has taken courses in intelligent mapping to be certified for work at a geographical information systems firm. Recently, though, she has had to put her studies on hold.

“I have two students in college and their tuition comes first,” she said.

With her own schooling prospects uncertain and the family budget tight, Fast is now preparing to launch a small business — in cake decoration.

“I’m using my engineering background to create some amazing cake designs,” she said.

Labor Secretary Hilda L. Solis said the large number of women who left the labor force may partly reflect the many laid-off schoolteachers having trouble finding new work.

don.lee@latimes.com

christi.parsons@latimes.com