
Economy Adds Fewer Jobs in November
(Nonfarm payrolls article updated with additional information, analyst commentary.)
NEW YORK (TheStreet) -- The economy added fewer jobs than expected in November, further challenging hopes for a stronger recovery in jobs.
According to the Labor Department's Employment Situation Report, nonfarm payrolls rose by 39,000 in November. The Labor Department also revised upwards its estimate for the previous month to 172,000 from 151,000. Still, the number was far weaker than expectations. Economists polled by
Thomson Reuters
expected nonfarm payrolls to rise by a substantially higher 140,000.
The unemployment rate crept up to 9.8%. Economists had expected the rate to be unchanged at 9.6%. The average workweek for employees on private payrolls was unchanged at 34.3 hours, while the average hourly earnings inched higher by 1 cent to $22.75.
The private sector added only 50,000 jobs during the month. Estimates for private sector growth among analysts who spoke to
TheStreet
ranged from 158,000 to 170,000.
The retail industry shed 28,000 jobs during the month after adding 13,000 in the prior month. The goods producing and manufacturing sector also remained weak, shedding 15,000 and 13,000 jobs respectively.
Temporary hiring rose 39,000, supporting the job growth during the month. The government, meanwhile, axed 11,000 jobs during the month, in line with the downward trend in recent months.
A strong ADP report on private sector growth, the largely downward trend in jobless claims in recent weeks and signs of returning consumer confidence had raised expectations for a recovery in the job market.
On Wednesday, the
ADP National Employment Report said private sector employment rose by 93,000. That number was well ahead of expectations for an addition of 53,000, and it raised hopes for a strong government report on Friday.
On Thursday, the Labor Department said initial weekly jobless claims for the week ended Nov. 20 rose by 26,000 to 436,000 after falling to a two-year low the week before. Still, the four-week moving average, which adjusts for week-to-week volatility, edged lower, signaling that layoffs might be slowing.
Chris Low, economist at FTN Financial, believes that the report means that the path to recovery may take a longer time to materialize. "There may be seasonal distortions at work -- there were all sorts of odd things going on with teacher hiring and we all know retailers are experimenting with their holiday sales strategies this year -- but even if one ignores government and looks at private employment, which rose 50k in November, and then calculates 2-month or 3-month averages to avoid seasonal distortions, the result (for either average) is only about 105,000 jobs per month, a rate well below what is required to pull the unemployment rate lower," he wrote in a note.
Jeff Kleintop of LPL Financial was reluctant to read too much into a single month's report, given the better-than-expected economic data released in recent weeks. He believes that the job growth will continue to show an uneven pattern, "2 steps forward and 1 step back," and that markets will have to be prepared for that volatility. "Jobs are not going to grow in a steady even 150,000 pace that we have seen," he said.
He pointed out that the market reaction was not too adverse to the report. But another bad report in December might hurt sentiment. "Two months
of poor reports back to back will shake confidence," said Kleintop.
General Motors
(GM) - Get Report
,
General Electric
(GE) - Get Report
and
Chrysler
were among firms that announced new hiring earlier this week, even as
Novartis
(NVS) - Get Report
and
State Street
(STT) - Get Report
announced layoffs.
Irrespective of the reports in the coming months, economists agree that job growth would have to be significantly higher to materially lower the unemployment rate.
"The level of growth we are seeing at this point is barely enough to cover new entrants into the job market," said Mike Schenk, economist at Credit Union National Association, ahead of the report. He estimated jobs will have to grow at a pace of 400,000 a month to materially lower unemployment -- not something he foresees happening in the next 12 months. Even if the economy manages to add 175,000 jobs on a sustained basis, the better prospects will likely prompt discouraged job seekers to resume their searches, which would keep the unemployment rate elevated.
On Wednesday, the
Federal Reserve
in its beige book report said that economic activity was improving in most districts but that employers still seemed reluctant to hire. "Employers are waiting for clearer signals of expanding business prospects before adding significantly to payrolls."
On Tuesday, Fed Chairman Ben Bernanke said at a meeting with business leaders in Ohio that the U.S. economy was not growing fast enough to "materially" lower unemployment rate.
Schenk said the economy needs to grow between 2.75% to 3% for the job market to be in better shape. "2.5% growth just won't cut it," he said.
Stocks were modestly lower after the report. The
SPDR Dow Jones Industrial Average
(DIA) - Get Report
was down 0.2% . The
SPDR S&P 500
(SPY) - Get Report
and the
PowerShares QQQ
(QQQQ)
were losing 0.3% and 0.1% respectively.
-- Written by Shanthi Bharatwaj in New York
>To contact the writer of this article, click here:
Shanthi Bharatwaj
.
>To follow the writer on Twitter, go to
.
>To submit a news tip, send an email to:
.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.









