In the midst of the European debt crisis, instability in the oil-rich Middle East and concerns about a Chinese economic slowdown, the American unemployment rate dropped last month to 8.6%, its lowest level in two and a half years.
The nation’s employers added 120,000 jobs in November, and job growth for the previous two months was better than expected. The numbers look like good news for President Obama as he heads into the 2012 Presidential election.
Even so, economists worry that a default of Greece or Italy could plunge Europe into a depression, which could send a shock wave across the ocean to throw the American economy off course. This year, higher oil prices, the Japanese earthquake, and the stalemate over the United States debt ceiling managed to drain the energy from the recovery.
November’s drop in unemployment was a welcome relief, given that the jobless rate held at 9% for most of 2011. It is at the lowest level since March 2009.
The share of workers who were unemployed fell in November partly because some people found jobs and partly because some discouraged workers quit looking for work.
A separate survey of employers, which economists pay more attention to than the unemployment rate, found that companies added 120,000 jobs last month.
Companies have taken on more temporary workers. Help-wanted advertising, retail sales, and auto sales have risen; jobless claims have fallen; and businesses seem to be getting loans more easily. Most encouraging was a recent survey of small businesses that found hiring intentions to be at their highest level since September 2008.
On the issue of government action to stimulate the economy, there has been some movement in Washington toward extending the payroll tax cut, which will expire at the end of this month. Economists have said that allowing the tax cut — which lets more than 160 million mostly middle-class Americans keep two percentage points more of their paychecks — to expire could be a drag on job creation and output growth.
An extension would probably lead to 600,000 to one million more jobs. The other stimulus program scheduled to expire by 2012 is the extension of unemployment insurance benefits, allowing some jobless workers to continue collecting for as long as ninety-nine weeks. Millions of people have exhausted their benefits. Failing to renew the extensions will cause five million more people to lose benefits next year.
Unemployment benefits have one of the most stimulative effects on the economy, because recipients are likely to spend all the money they receive quickly and pump more spending through the economy.
Via The New York Times.