WRAPUP 6-U.S. jobless rate jump casts cloud on recovery

* Nonfarm payrolls rise 39,000 in November

* Private employment gains 50,000, govt jobs fall 11,000

* Jobless rate rises to 9.8 percent from 9.6 percent

* Average workweek steady at 34.3 hours, earnings tick up
(Adds details, fresh economist comments, updates markets)

By Lucia Mutikani

WASHINGTON, Dec 3 (BestGrowthStock) – U.S. employment barely grew
in November and the jobless rate unexpectedly hit a seven-month
high, hardening views the Federal Reserve would stick to its
$600 billion plan to shore up the anemic recovery.

Nonfarm payrolls rose 39,000, with private hiring gaining
only 50,000, just a third of what economists had expected, a
Labor Department report showed on Friday. The unemployment rate
jumped to 9.8 percent from 9.6 percent in October.

The weak report was a surprise given the relative strength
of some other recent economic signals, including robust retail
sales. While the data raised a warning flag, many analysts
cautioned against reading too much into it.

“The November jobs report understates the improvement in
the job market last month and still supports our baseline
forecast of a sustained half-speed economic expansion,” said
Stuart Hoffman, chief economist at PNC Financial Services in

Economists had expected 140,000 new jobs last month with
the jobless rate holding steady.

A separate report from the Institute for Supply Management
showed service sector activity rose in November, with a gauge
of hiring reaching its highest level since October 2007, before
the economy tumbled into recession. [ID:nN0391037]

Stock market investors also appeared to be in disagreement
with the weak hiring number and U.S. shares were trading only
marginally lower in afternoon trade. Prices for U.S. government
debt rose, while the dollar fell against the yen.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on U.S. payrolls: http://r.reuters.com/wap48q For a snap analysis, see: [ID:nN03118295] For a table on the jobs data, see [US/JOBS] For a table on the ISM data, see [US/NAPS1] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Payrolls for September and October were revised to show
38,000 more jobs were gained in those months than previously
estimated, taking some sting out of the report. Economists said
November’s data could also be adjusted higher.


“Some of the areas of weakness were a bit surprising,” said
Zach Pandl, a U.S. economist at Nomura Securities International
in New York. “Manufacturing and retail sales seem to contradict
other available evidence, and the services ISM is outpacing the
growth we saw in services employment during the month.”

One of the big surprises was the loss of 28,100 retail jobs
last month despite signs of a busy holiday shopping season.

Adding to the retail mystery, data collected by workforce
management firm Kronos showed retailers recorded 56,028 hirings
on a seasonally adjusted basis in November, up 77.5 percent
from October.

Economists said it was possible some last minute hiring by
retailers had not been captured in the Labor Department’s
survey of employers. It was also likely that many of the
workers were being hired through staffing agencies, which would
boost temporary help employment.

Temporary help services increased 39,500 last month,
building on October’s 34,700 gain.

“We’re reluctant to take this report at face value, but it
does underline that the recovery remains a gradual one,” said
Nigel Gault, chief U.S. economist at IHS Global Insight in
Lexington, Massachusetts.

In November, the jobless rate jumped partly because the
survey of households on which it is based showed discouraged
workers rejoined the labor force. However, that survey also
showed a drop in employment.

Concerns about joblessness and low inflation led to the
Fed’s decision last month to launch its now much-criticized
government bond buying program to push already low interest
rates down further to lift demand.

The U.S. central bank cut overnight interest rates to near
zero in December 2007 and had already bought $1.7 trillion in
mortgage-related and government debt. Traders in futures
markets on Friday pushed expectations of an eventual increase
in overnight rates out until mid-2012.

“Fed officials will certainly agree to continue their asset
purchases at the upcoming December 14 meeting. In fact one
wonders if they will increase the pace of purchases,” said
Chris Rupkey, chief financial economist at Bank of
Tokyo-Mitsubishi UFJ in New York.


A raft of recent data had raised optimism the economy was
accelerating after hitting a soft patch in the summer. That
soft patch helped Republicans wrest control of the House of
Representatives from Democrats in November elections.

Unemployment is expected to remain painfully high for
years, a problem for President Barack Obama, who will face
re-election in 2012.

The White House said the soft report underscored the
importance of extending tax cuts for middle-class Americans,
but Republicans said it supported their push to stop tax
increases for the wealthy.

Vice President Joe Biden huddled with Treasury Secretary
Timothy Geithner and White House budget chief Jack Lew — the
administration’s two top tax negotiators — to talk strategy in
the high-stakes showdown over Bush-era cuts set to expire at

The weak jobs report could give fresh impetus to get a deal
done. Expiry of the tax cuts without offsetting stimulus
elsewhere could deal a hard blow to the economy.

The report showed employment in November was weak across
the board, with government payrolls contracting as local
authorities continue to struggle with budget problems.

Payrolls in the goods-producing sector fell 15,000 as
manufacturing jobs declined for a fourth straight month and
construction reversed October’s surprise gains.

Employment in the private service-providing sector rose
65,000 in November, with the weakness in the retail sector
offset by strong hiring by professional and business services,
and the gain in temporary employment.
(Editing by Neil Stempleman)

WRAPUP 6-U.S. jobless rate jump casts cloud on recovery