The labour department said yesterday that employers had added a net 200,000 jobs last month and the unemployment rate had fallen to 8.5 per cent, the lowest since February 2009. The rate has dropped for four straight months.
The hiring gains cap a six-month stretch in which the economy generated 100,000 jobs or more in each month. That has not happened since April 2006.
The steady drop is a positive sign for President Barack Obama, who is bound to face voters with the highest unemployment rate of any sitting president since the Second World War. Unemployment was 7.8 per cent when Obama took office in January 2009.
Still, the level may matter less to his re-election chances if the rate continues to fall. History suggests that presidents’ re-election prospects hinge less on the unemployment rate itself than on the rate’s direction during the year or two before election day.
For the whole of 2011, the economy added 1.6 million jobs, better than the 940,000 added in 2010. The unemployment rate averaged 8.9 per cent last year, down from 9.6 per cent the previous year. Economists forecast that the job gains will top 2.1 million this year.
The December report painted a picture of a broadly improving job market. Average hourly pay rose, providing consumers with more income to spend. The average work week lengthened, a sign that business is picking up and companies may soon need more workers. And hiring was strong across almost all major industries.
Manufacturing added 23,000 jobs, transportation and warehousing saw a gain of 50,000 jobs and retailers added 28,000 posts.
Even the beleaguered construction industry gained 17,000 workers.
A more robust hiring market coincides with other positive data that showed the economy ended the year with some momentum.
Weekly applications for unemployment benefits have fallen to levels last seen more than three years ago. Holiday sales were solid. And November and December were the strongest months of 2011 for US car sales.
Many businesses say they are ready to step up hiring in early 2012 after seeing stronger consumer confidence and greater demand for their products.
David Miller, partner at Cheviot Asset Management, said: “A boost to consumer confidence in the US would be particularly welcome as it remains the world’s biggest consumer market. Whilst Europe is obviously at the forefront of investors’s immediate concerns, the US and China will make the difference this year.”