Dec 4, 2010

US unemployment rate hits at 9.8 percent

The US jobless rate surged to 9.8 percent in November, a hammer blow to the economic recovery and to President Barack Obama's hopes for a quick end to high unemployment.

The world's largest economy created many fewer jobs than expected and the unemployment rate rose from 9.6 percent to its highest level since April, the Labor Department reported.

A measly 39,000 jobs were created during the month, well short of the 130,000 predicted by economists and well beneath the levels needed to dent unemployment rates.

Job losses in the retail and manufacturing sector led the decline as the employment market once again proved unable to untether itself from the long-ended recession.

The jobless rate has remained above nine percent for the last 19 months, leaving more than 15 million jobseekers unemployed.

The White House, under pressure to prove its economic policies are working, acknowledged the unemployment rate was "unacceptably high."

Massive government stimulus plans, while alleviating the worst ravages of the downturn, have failed to bring unemployment levels into line with those seen over the last decade.

But Austan Goolsbee, one of Obama's top economic advisers, warned it was "important not to read too much into any one monthly report."

"Although the overall trajectory of the economy has improved dramatically over the past year, there will surely continue to be bumps in the road ahead such as this," he said.

The White House also pointed to a private sector that is still creating jobs, albeit at a slower rate than desired.

"Today's employment report shows that private sector payrolls increased by 50,000 in November, lower than expectations, but continuing eleven consecutive months of private sector job growth," Goolsbee said.

While the high rate of joblessness is a constant worry for the eight-plus million Americans who lost their jobs during the crisis, policymakers are increasingly concerned about how long the trend has persisted.

With nearly 40 percent of the jobless unemployed for more than six months, fears are growing that high jobless rates may be more than a temporary result of a brutal recession.

"Today's jobs report marks the 19th consecutive month in which unemployment has exceeded nine percent, an unacceptable result," said Eric Cantor, a leading Republican lawmaker in the House of Representatives.

He urged Congress to extend Bush-era tax cuts that critics argue the deficit-ridden country can ill afford, but which supporters argue will help spur the recovery.

"Congress should reassure job creators and investors by taking the impending tax hikes off the table," Cantor added.

With Congress frozen by partisan politics and gripped by fears about US debt levels, Obama has hoped to lower the unemployment rate by clinging to what government stimulus still exists.

The White House warned that Congress's refusal to extend unemployment benefits would damage the economy as two million Americans will see their incomes slashed.

Goolsbee said Congress must also extend tax cuts for the middle class.

"Failure to do this would jeopardize hundreds of thousands of additional jobs, and leave millions of Americans, who are out of work through no fault of their own, on their own."

On Friday the Labor Department raised its estimates of job creation in October from 151,000 to 172,000, a hike that was of little succor to markets.

"Despite some upward revisions, the headline number was wildly off, and wildly disappointing," said Jason Schenker, president of Prestige Economics.

The Dow Jones Industrial Average was down 11 points (around 0.10 percent) after the first hour of trading.

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