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U.S. Unemployment rate dips to 8.5% in December

Job gains occurred in manufacturing sector, transportation and warehousing, retail trade, health care, and mining.

A newly released report from the U.S. Department of Labor shows nonfarm payroll employment rose by 200,000 in December, bringing the unemployment down slightly to 8.5 percent. Employment in the private sector rose by 212,000 in December and by 1.9 million over the year. Government employment changed little over the month but fell by 280,000 over the year.

Following is a summary of how the various sectors performed:

  • Manufacturing employment expanded by 23,000, following four months of little change. Employment also increased in transportation equipment (+9,000), fabricated metals (+6,000), and machinery (+5,000) during December.
  • Retail trade continued to add jobs in December, with a gain of 28,000. Employment in the industry has increased by 240,000 over the past 12 months. Over the month, job gains continued in general merchandise stores (+13,000) and in clothing and clothing accessories stores (+11,000). Employment in sporting goods, hobby, book, and music stores fell by 10,000.
  • Mining employment rose by 7,000 over the month. Over the year, mining added89,000 jobs.
  • Meanwhile, health care added 23,000, with employment in hospitals increasing by 10,000. Over the year, health care employment has risen by 315,000.
  • Within leisure and hospitality, employment in food services and drinking places continued to trend up in December (+24,000). Over the year, food services and drinking places has added 230,000 jobs.
  • Construction employment changed little in December. Within the industry, nonresidential specialty trade contractors added 20,000 jobs over the month, mostly offsetting losses over the prior two months.
  • Employment in professional and business services changed little in December for the second month in a row. The industry added 42,000 jobs per month, on average, during the first 10 months of 2011.
  • Government employment changed little in December but was down by 280,000 over the year. Job losses in 2011 occurred in local government; state government, excluding education; and the U.S. Postal Service.

According to Alan Krueger, chairman of the White House Council of Economic Advisers, the ongoing reduction in the U.S. unemployment rate “provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression.” Still, he says, "It is critical that we continue the economic policies that are helping us to dig our way out of the deep hole that was caused by the recession that began at the end of 2007. Most importantly, we need to extend the payroll tax cut and continue to provide emergency unemployment benefits through the end of this year, and take other steps the president has proposed in the American Jobs Act.”

Some economists, including Dr. Ken Mayland, president of Pepper-Pike, Ohio-based ClearView Economics,  urge caution when dissecting the numbers. As he explains: "While the drop [in] the unemployment rate is welcomed, we are continuing to see this curious phenomenon of people of working age not participating in the labor force (+194,000) and dropping out of the labor force (-50,000). If we currently experienced the same participation rate as was seen in 2007, the unemployment rate would be about two percentage points higher."

Taking into account all the underemployment, Dr. Mayland noted, the "U-6" unemployment rate was 15.2% for December, but acknowledged that was down from 15.6% in November. On a positive note, "total household unemployment did rise by 176,000 in December." 

More encouraging news: The total advance in payroll employment included a 7,500 -person reduction in temporary help," hinting that employers were willing to make a more permanent commitment to hiring," Dr. Mayland surmised.   

The complete unemployment report for the month of December is available online.
 

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