Jeanna Smialek (c) 2013, Bloomberg News
WASHINGTON — The jobless rate dropped to a five- year low of 7 percent in November as American employers added more workers than forecast, showing further progress in the labor market that will provide a spark for the world’s largest economy.
The 203,000 increase in payrolls followed a revised 200,000 advance in October, the strongest back-to-back gain since February-March, Labor Department figures showed Friday in Washington. The median forecast of 89 economists surveyed by Bloomberg called for a 185,000 advance.
The pickup in employment, combined with faster wage gains and more hours, provides American workers with the means to spend and signals companies are confident that demand will improve. The dollar rallied on bets that the figures may prompt Federal Reserve policymakers to advance their timetable for a tapering of the bond purchases aimed at boosting growth.
“The labor market is healing,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Ala., who projected a 201,000 gain in payrolls. “We have seen pretty consistent job growth, and we do expect to see it over 200,000 on a monthly average basis next year. We expect the overall rate of growth to pick up.”
The gain in employment was the biggest in three months. Estimates in the Bloomberg survey for payrolls ranged from increases of 115,000 to 230,000. Revisions to prior reports added a total of 8,000 jobs to overall payrolls reports in the previous two months.
Factories took on the most workers since March 2012, employment in construction accelerated and payrolls in transportation and warehousing picked up, today’s figures showed.
The unemployment rate, derived from a separate Labor Department survey of households rather than employers, was forecast to fall to 7.2 percent. In October, joblessness rose for the first time in five months, reflecting workers furloughed during a federal government shutdown that lasted half the month.
Among those finding work was Edward Jamgotchian, 50, a father of two who lives in Walnut Creek, Calif. Last holiday season, he lost his job as an information security manager at Pensco Trust Company in San Francisco, where he had worked for eight years.
“I felt that initially, the job market was very tight based on the number of positions that were available, but towards the middle of the year I sensed that things were getting moving and more positions were being posted,” he said.
Jamgotchian started a temporary job as a business continuity consultant at Oakland, -based Kaiser Permanente, which offers non-profit health-care plans, at the end of August. In November he learned that it could become a permanent position.
The Labor Department’s household survey showed more people were entering the labor force. The so-called participation rate increased to 63 percent in November. A month earlier it fell to 62.8 percent, the lowest level since March 1978.
Private employment, which excludes government agencies, rose 196,000 after a revised 214,000 advance. Private payrolls were projected to rise by 180,000, the survey showed.
Job gains have combined with lower gasoline prices, stock- market gains, higher home values and more available credit to fuel demand for big-ticket goods such as automobiles.
Cars and light trucks sold at a 16.3 million annualized rate in November, the fastest pace since 2007, according to figures yesterday from Ward’s Automotive Group.
“We feel very good about the direction of the economy and our own momentum,” Kurt McNeil, vice president for U.S. sales and service at General Motors, said during a Dec. 3 sales and revenue call. “The economy is creating jobs and household wealth, energy costs are dropping, and credit is available and affordable.”
Factories added 27,000 jobs, helped by a pickup at automakers, after a 16,000 gain in October. Construction firms took on 17,000 workers.
The energy sector has also been a bright spot for hiring, as America experiences an oil and natural gas boom.
“We’ll have a fairly aggressive hiring program over 2014 and through 2016,” Darin Holderness, chief financial officer at Midland, Texas-based oil and natural gas driller Concho Resources Inc., said in a Dec. 3 presentation.
Fed policymakers are considering how and when to reduce $85 billion in monthly asset purchases without triggering a rise in interest rates, which could erode progress in the labor market and slow economic growth.
“What they’ve been waiting for is evidence of faster job growth,” said Sam Coffin, an economist at UBS Securities in New York, who correctly projected the decline in the unemployment rate to 7 percent and predicts the Fed will start tapering in January.
“While they’ve nominally targeted the unemployment rate, it feels from their talks that they’re more focused on payrolls actually, and probably 200,000 a month is what they’re looking for,” he said.
Average hourly earnings increased by 0.2 percent to $24.15 in November from the prior month, and climbed 2 percent over the past 12 months.
The average work week for all workers climbed six minutes to 34.5 hours last month.
A faster pace of hiring is needed to help reduce slack in the labor market. Wage growth would lay the groundwork for increased consumer spending, which accounts for almost 70 percent of the economy.
Household purchases grew in the third quarter at the slowest pace in almost four years and business spending on equipment was stagnant, a report yesterday showed.
The economy grew at a 3.6 percent annual rate from July through September, led by the biggest increase in inventories since early 1998, the Commerce Department said. Final sales, which exclude unsold goods, climbed 1.9 percent.
The Fed said in its latest Beige Book business survey, released this week, that gains in manufacturing, technology and housing fueled “modest to moderate” economic growth from early October through mid-November.
“Hiring showed a modest increase or was unchanged,” the central bank said in its survey, which contains anecdotal reports from the 12 Fed district banks two weeks before the officials meet to set monetary policy.
— With assistance from Kristy Scheuble and Michelle Jamrisko in Washington.