5-Year Low: Unemployment Down to 7%
The latest jobs report proved even better than expected as seasonal hiring pushed the unemployment rate down to 7 percent, the lowest in five years. According to the Labor Department, the economy added 203,000 jobs in November, about as many as were added in October.
Analysts had projected a 7.2 percent unemployment rate, after the October report showed a drop to 7.3 percent. Not only did the economy exceed expectations, overall labor force participation rose from 62.8 percent to 63 percent. That means the unemployment rate went down despite more people reentering the job market.
While many of the new jobs were seasonal hires for large retailers, many were in industries that have seen significant declines since the recession. The manufacturing industry added 27,000 new jobs, the most since spring of 2012. The construction industry added another 17,000 jobs.
The markets reacted to the positive news quickly as the Dow Jones soared by 143 points and the S&P 500 added 18 points before the market even opened.
Because this is the second month in which job growth has exceeded projections, many experts believe that the economy is strong enough for the Federal Reserve to start winding down their bond purchasing program, also known as quantitative easing or the QE program. Outgoing Federal Reserve Chairman Ben Bernanke had cited the 7 percent mark as the milestone at which the Fed would taper its bond buying. Analysts at Goldman Sachs believe the program won’t be tapered until March.
Earlier this year, the Federal Reserve met to discuss how to end the QE program without causing the economy to slow. The incredibly low interest rates since the recession have helped the auto industry and housing market recover and prosper but continuing the program for too long can cause an unsustainable bubble. The board is currently considering implementing an automatic scale that would adjust the interest rates based on the unemployment rate.
(Image courtesy of Shirley Li/Medill)