Business

US unemployment rate hits seven-month high

A jobs sign is seen on the front of the US Chamber of Commerce building
Image caption High unemployment is undermining economic recovery, analysts say

The US unemployment rate rose to 9.8% in November, the highest rate since April, the US Labor Department has said, raising fears about the strength of the country's economic recovery.

Just 39,000 jobs were created last month, below analysts' expectations. In October, 172,000 jobs were created.

Stocks markets fell sharply after the figures were published.

Analysts are concerned that the levels of high unemployment in the US are undermining the economy's recovery.

Market shudder

The announcement - which came before the opening bell on Wall Street - caused the Dow Jones index to drop slightly at the open, before recovering late in the day to close slightly higher.

The euro jumped an entire cent against the dollar, to $1.335, following the data release.

The currency rallied another cent during the course of the day as fears over eurozone government debts receded, while expectations of further quantitative easing by the US Federal Reserve rose.

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The jobs number is a first estimate, and could be revised in the coming months.

The US Labor Department said 15.1 million people were now unemployed in the US, equating to a rate of 9.8%. This is an increase from the 9.6% rate recorded in the previous three months.

Jobs were created in the business services, healthcare and mining sectors, but job numbers in the retail and manufacturing sectors fell.

Discouraged workers

Analysts were distinctly underwhelmed by the jobs figures.

The worst news was that the jump in the unemployment rate was not driven by an increase in labour force participation, according to economist Bill McBride on his Calculated Risk blog.

During the slump, many redundant workers gave up seeking new jobs altogether, meaning that they dropped out of the official labour force, and out of the unemployment figures.

As the jobs market improves, economists expect these discouraged workers to start looking for work again, meaning they would be reclassified as unemployed.

But the data suggests this has not happened yet.

Instead, the rise in the unemployment rate is simply due to a failure of US job creation to keep up with the growing US population.

'Very disappointing'

Opinions were divided as to the implications for the US economic recovery.

"Obviously it's a surprise - it's very disappointing. We were looking for something much, much higher," said Bernard Baumohl at the Economic Outlook Group.

However, he said the number of new jobs would probably be revised "substantially up" next month, in line with recent job figures.

Others were less willing to see a silver lining.

Paul Dales at Capital Economics called the job figures a "painful reality check" for those hoping that a meaningful recovery was already underway.

"The truth is that the economy is going nowhere at a time when companies are not willing to boost hiring," he said.

Long-term worries

Another worrying indicator was a rise in the number of long-term unemployed, by over 100,000 to 6.3 million.

The number of those out of work for more than 26 weeks had declined steadily since peaking this summer, but the trend reversed sharply in the past two months.

Economists are particularly concerned about the unprecedented level of long-term unemployed during the current slump, as these workers typically find it hardest to find work again.

It suggests that much of the unemployment may be "structural" - in other words these workers may still be out of a job once the economy is fully recovered.

To compound matters, US citizens out of work for more than 26 weeks also ceased to be eligible for unemployment benefits as of the end of November.

If Congress fails to introduce a further extension of benefits, economists worry that the long-term unemployed will have much less income to spend.

Stimulus measures

At the beginning of last month, the US Federal Reserve, spurred by weak economic growth, announced a stimulus programme to pump $600bn (£382bn) into the economy.

The US economy grew by an annualised rate of 2.5% between July and September.

High unemployment and a weak housing market in particular are hampering growth, analysts say.

This is the second major stimulus package the Fed has introduced to try to kick-start the recovery, having pumped $1.75tn into the economy during the downturn.

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