Economy adds 203,000 jobs in November; unemployment rate drops to 7%

WASHINGTON -- The U.S. economy added a surprisingly strong 203,000 net new jobs last month and the unemployment rate fell to 7%, the lowest level in five years, the Labor Department said Friday.

The November figure, which beat analyst expectations of about 180,000 new jobs, along with slight revisions to the previous two months’ figures mean the economy has added an average of 204,000 jobs over the past four months.

That is the sustained level of job growth that Federal Reserve policymakers have been looking for in order to start reducing a key stimulus program. Friday’s jobs report, combined with positive recent economic data, adds to pressure on the Fed to start scaling back its monthly $85-billion bond purchases -- known as quantitative easing -- as soon as its Dec. 17-18 meeting.

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Kathy Bostjancic, director of macroeconomic analysis at the Conference Board, said November’s job gains show the labor market was resilient in the face of slowing economic growth in the fourth quarter, caused in part by the partial federal government shutdown in October.

“The labor market readings may be strong enough for the Federal Reserve to start the tapering of its quantitative easing in December,” she said. “More jobs, and the paychecks that go with them, may help drive up consumption growth through the first quarter, and support a continuation of the housing market recovery.”

The November job gains were broad-based.

More of the new jobs were in higher-paying fields than in recent months. The construction industry added 17,000 jobs in November, up from 12,000 the previous month. Manufacturers increased their payrolls by 27,000 in November, up sharply from 16,000 the previous month.

Overall, the private sector added 196,000 jobs in November, while government added 7,000.

The economy added 200,000 jobs in October, revised down from the initially reported 204,000. But the Labor Department revised September’s figure to 175,000 from the initial 163,000 reported.

The unemployment rate, which is determined by a separate survey of households, fell more than expected last month. Economists had projected a slight drop to 7.2% from October’s 7.3%.

The 7% rate was the lowest since the 6.8% rate in November 2008.

Friday’s jobs report comes after a slew of recent upbeat data about the economy since the end of the 16-day partial government shutdown in October.

Fed officials have been watching public and private economic reports closely to determine when to start reducing the central bank’s key stimulus program.

Analysts had said that if Friday’s Labor Department report showed the economy added close to 200,000 jobs. that could lead Fed policymakers to tapering quantitative easing.

But another budget battle looming in Washington, when a short-term spending bill expires on Jan. 15, could give Fed officials pause.

Anticipation of a reduction in the stimulus program, in place since September 2012 to push down long-term interest rates, has led the Dow Jones industrial average to fall five straight days through Thursday.

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