US unemployment rate drops in December

Stubbornly high unemployment has hindered the US economic recovery

The US unemployment rate dropped to 9.4% in December from 9.8% in November, the biggest one-month drop since April 1998, official figures show.

Some 103,000 jobs were created last month, the Labor Department said, although this was fewer than the 145,000 to 175,000 forecast.

The lower rate came not only because more people found jobs, but also because 260,000 had given up looking.

If people stop searching for work, they are no longer counted as unemployed.

Stubbornly high unemployment has hindered the US economic recovery.

And Federal Reserve chairman Ben Bernanke warned that it may take up to five years for the unemployment rate to drop to a more historically typical 6%.

But he added that while the economy should grow more strongly this year as consumers and businesses boosted their spending.

But he added a warning: "Notwithstanding these hopeful signs... [with] employers reportedly still reluctant to add to payrolls, considerable time likely will be required before the unemployment rate has returned to a more normal level.

"Persistently high unemployment, by damping household income and confidence, could threaten the strength and sustainability of the recovery."

Headline miss

Overall employment for October and November was revised to show 70,000 more job gains than earlier reported, and the unemployment rate is now at its lowest since May 2009.

Private hiring increased in December by 113,000, while government employment fell by 10,000.

Employment rose by 47,000 in the leisure and hospitality sector and by 36,000 in healthcare, but was little changed in other major industries, the Labor Department said in its monthly report.

The falling rate appeared to counter concerns over fewer-than expected jobs being created, with shares on Wall Street relatively unchanged in early trading.

Meanwhile the euro rose into positive territory against the dollar after the report, but then relinquished those gains.

'Slow recovery'

Analysis

Andrew Walker Economics correspondent, BBC World Service

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The new figures show that a recovery in the labour market is continuing. But it is still not strong.

The number with jobs rose by more than 100,000 but the working age population grew by more than that.

It has been a persistent pattern over the last year. There are nearly 2 million more adults in the US than a year ago, but only 1.1 million more jobs.

The fact that unemployment nonetheless declined reflects a fall in the numbers who want to work. Those who don't want to are not counted among the unemployed.

"The headline miss [on jobs created] is pretty bad, but the drop in the unemployment rate is the one reason why the dollar has not collapsed completely," said Brian Dolan, chief strategist from Forex.com.

"Overall, a very disappointing number that reinforces the idea that we're in for a long, slow jobless recovery."

Moody's Analytics economist Ryan Sweet said while the job market was likely to improve, the lower unemployment rate was unlikely to be sustained.

And economist Peter Morici, professor at the Smith School of Business, University of Maryland, agreed that this was a disappointing set of data.

He said that while there had been a string of stimulus measures taken in the US - the country's huge trade deficit was holding back job creation because the country was importing far more than it produced.

"The growing trade deficit is a tax on domestic demand that offsets much of the benefits of stimulus spending and tax cuts," he said.

Meanwhile, US business group, the Conference Board, said that while the job market had more momentum than it did going into 2010, the report "won't help the continuing weakness in consumer confidence".