December 14th, 2012
The U.S. unemployment rate has fallen to 7.7 percent–its lowest point since December 2011. The U.S. economy added 146,000 jobs in November. It sounds as if the economy has been improving, but the Labor Department’s report released on Friday has provided a mixed picture.
Super-storm Sandy disrupted economic activity. Construction employment fell 20,000 and 369,000 individuals were prevented from going to work due to the weather. Restaurants, retailers, and other businesses remained closed in late October and early November in 24 states, particularly the Northeast. Lost wages and salaries for the month of October totaled about $ 18 billion at an annual rate.
The storm’s impact on consumer spending and income has been detrimental on economic growth. But the economy is expected to get a boost from post-Sandy rebuilding efforts in the Northeast.
According to the labor department report, even though job growth has been steady throughout the storm, the economy added 49,000 fewer jobs in October and September than what was expected. The U.S. unemployment rate fell to a four-year low of 7.7 percent from 7.9 percent in October, but this is mostly due to discouraged workers who have simply given up on finding jobs.
The U.S. economy has been averaging 158,000 additional jobs per month since July. Compared with an average 146,000 from the first half of the year, the job growth rate rate has increased in the latter half.
Job growth has been strong in the following sectors:
- Retail: 53,000
- Temporary Help Companies: 18,000
- Education & Healthcare: 18,000
- Trucking: 2,500
Hiring has increased in the second half of 2012, but not as much as expected. Companies are still hiring as they await Congress’ response to the looming “fiscal cliff” which involves sharp tax increases and spending cuts going into effect next year–unless congress acts.
The stock market showed positive signs to the Labor Department report. Stock futures jumped after the report. Dow Jones Industrial Average futures went from a drop of 20 points before the report to a rise of 70 points after the report. The yield on the benchmark 10-year U.S. Treasury note, rose from 1.58 percent before the report to 1.63 after the report.
The growth of the U.S. economy has held strongly at 2.7 percent in the third quarter of 2012, but economists fear that it may stagger to 1.5 percent in the 4 quarter due to Hurricane Sandy and the gloomy prospects of the “fiscal cliff.” A rate of 1.5 percent will not be enough to improve the employment outlook going into the future.
Economic growth could accelerate next year if the fiscal cliff is avoided; the economy may also get a much needed boost from post-Sandy rebuilding efforts in the northeast.