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Jobless Rate Drops to Four-Year Low Ahead Of Fiscal Cliff

The U.S. unemployment rate declined to its lowest in four years in November and the nation's employers added more new positions than expected, even though budget negotiations being conducted by federal lawmakers could potentially result in higher taxes and reduced spending next year.

Strong Jobs Creation  

Data provided in a Labor Department report indicated that U.S. employers added 146,000 new positions to their payrolls in November. This figure was sharply higher than the median forecast of 85,000 new jobs that was provided by economists participating in a Bloomberg poll. A total of 91 market experts took part in the survey, and provided estimates ranging from 15,000 to 145,000.

Private payrolls rose 147,000 in November, far higher than the 90,000 predicted by the economists taking part in the Bloomberg poll. In addition, the payroll gains for October were revised downward to 138,000 from the previous estimate of 171,000.

The New York Times reports that the 146,000 new positions created in November was largely in-line with the average figure of 151,000 created every month in 2012. The number of positions created in November represents a sharp contrast to the meager job growth enjoyed earlier in the year, when many market participants were concerned that the United States would suffer a double-dip recession.

Dropping Jobless Rate  

The Department of Labor report also indicated that the nation's jobless rate dropped to 7.7 percent in November, down from 7.9 percent the month before. Although the actual unemployment rate was lower as a result of the most recent report, economists warned that the dropping jobless rate was the consequence of declining labor force.

Dean Maki, chief United States economist at Barclays Capital, stated that the nation's jobless rate will slowly work its way down to 7.1 percent by December 2013, according to the news source.

"The underlying trend in unemployment is downward, and that’s what we continued to see in the November figures," Mr. Maki stated. "Over the past year, unemployment has fallen a full percentage point and is now down 2.3 percentage points from its high in 2009."

Economic Momentum 

The strong jobs figures and other data paints a picture of an economy that is picking up steam during the holiday shopping season, according to Bloomberg. The sharp increases in hiring could mean strong consumption while people are shopping for the holidays.

"There is some decent momentum in the economy now, which we're going to need coming into next year when one way or another there is some amount of fiscal drag," Jerry Webman, chief economist at New York-based OppenheimerFunds Inc., which manages $186 billion, told the news source.

Housing data has been strong, and this activity has been linked to strong sales at furniture makers, the media outlet reports.

"We have a sense of much more positive momentum heading into next year than we did at this time last year," Alan Cole, president of Martinsville, Virginia-based Hooker Furniture Corp., stated while on a December 5 conference call with analysts, according to the news source. "We've expanded our workforce by about 5 percent to date and anticipate another 5 percent expansion in the coming months."

Budget Negotiations 

One undetermined variable that could impact the recent improvements in the economy is the budget negotiations of Washington lawmakers. If these officials fail to find an agreement before January 1, it will result in more than $600 billion tax hikes and spending reductions affecting the nation's economy.

How could your company more effectively harness the existing economic headwinds? 

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