U.S. unemployment rate drops to five-year low of 7%

PanARMENIAN.Net - The U.S. unemployment rate fell to a five-year low of 7% as employers added 203,000 jobs in November, Belfast Telegraph reported.

Stock investors were heartened by the news, with the Dow Jones industrial average surging 200 points, or 1.3%, in afternoon trading.

The economy added an average of 204,000 jobs from August through to November, up sharply from 159,000 a month from April through to July. The robust gain suggested that the economy will begin to accelerate.

The job market has shown signs of strengthening at other times since the recession ended four-and-a-half years ago, only to weaken and discourage hopes. Some economists say this time employers may have enough confidence in the economy and consumer demand to step up hiring. A sturdier job market would, in turn, accelerate Americans' spending and energise economic growth.

"It's hinting very, very strongly that the economy is starting to ramp up, that growth is getting better, that businesses are hiring," said Joel Naroff, president of Naroff Economic Advisors. The job growth has also fuelled speculation that the Federal Reserve will scale back its economic stimulus when it meets later this month.

It "gives the Fed all the evidence it needs to begin tapering its asset purchases at the next ... meeting", said Paul Ashworth, an economist at Capital Economics.

The unemployment rate has fallen nearly a full percentage point since the Fed began buying bonds in September 2012 and has reached 7% earlier than most analysts had expected.

In June, chairman Ben Bernanke had suggested that the Fed would end its 85 billion dollars in monthly bond purchases after the unemployment rate reached 7%. The Fed's bond purchases have been intended to keep borrowing rates low.

Bernanke later backed away from the 7% target. He cautioned that the Fed would weigh numerous economic factors in any decision it makes about its bond purchases. Many economists still think the Fed will not begin to cut back until January or later.

While the Fed weighs its options, U.S. employers may finally be gaining enough confidence in the economy, four-and-a-half years after the recession officially ended, to ramp up hiring.