WASHINGTON — US employment grew faster than expected in November, but a drop in the jobless rate to a near-four-year low as people gave up the search for work suggested the labour market was still tepid.
Nonfarm employment increased by 146,000 jobs last month, the Labour Department said on Friday, defying expectations of a sharp pull back related to superstorm Sandy.
However, job gains for both September and October were revised to show 49,000 fewer jobs created in those months than earlier reported.
The jobless rate fell to 7.7% last month, the lowest since December 2008. But the drop was because people gave up the search for work, which does not bode well for the economy.
The government said the storm that slammed into the densely populated east coast had not had a substantive effect on employment last month.
"Our analysis leads us to conclude that Hurricane Sandy did not substantively affect the national employment and unemployment estimates for November," said John Galvin, acting commissioner at the Bureau of Labour Statistics.
Economists polled by Reuters had expected payrolls to increase by 93,000 and the unemployment rate to hold steady at 7.9%.
Employment continues to be held back by fear the government may fail to prevent the $600bn in automatic tax hikes and government spending cuts set to take hold at the start of next year. The debt crisis in Europe has also weighed.
"Once Washington policymakers resolve the near-term fiscal and other policy challenges that have undermined business confidence, we expect the pace of recovery and job growth to begin to accelerate next year," said Lewis Alexander, chief economist at Nomura Securities in New York.
Policymakers at the Federal Reserve who meet on Tuesday and Wednesday are not expected to take much notice of the report
Economists said an anticipated tightening of fiscal policy next year, even if a deal is reached to avoid completely going over the fiscal cliff, provides ample reason for the US central bank to maintain its ultra-easy monetary policy stance.
"The Fed will want to do what it can to keep monetary policy easy. They would not want to do anything right now that would be a monetary tightening," said Jerry Webman, chief economist at Oppenheimer Funds in New York.
Relentless labour market weakness led the Fed in September to launch a programme to buy $40bn-worth of mortgage-backed securities every month to drive down borrowing costs.
That is on top of a programme dubbed "Operation Twist" in which it was reweighting securities it holds toward longer maturities. Twist expires at the end of this month and economists expect the Fed to replace it with a programme that buys government bonds with newly created money.
All of the meagre jobs gains in November were in the private sector, with government employment slipping 1,000.
Within the vast private services sector, retail employment gained 52,600, and professional and businesses services increased by 43,000. Temporary help hiring increased by 18,000.
In the goods-producing sector, manufacturing employment fell by 7,000. Construction payrolls surprisingly dropped 20,000, despite a surge on homebuilding, which is benefiting from the Fed’s accommodative policy stance.
Average hourly earnings increased by $0.04. The length of the average workweek held steady at 34.4 hours in November.
"Much greater strength in hiring is required over a longer period to deliver stabilisation in wage growth," said Julia Coronado, chief North America economist at BNP Paribas in New York.