US payrolls up, jobless rate drops to 8.5%

Washington: US employers added more workers to payrolls than forecast in December and the jobless rate declined to an almost three-year low, showing that the labour market gained momentum heading into 2012.

The 200,000 increase followed a revised 100,000 rise in November that was smaller than first estimated, Labour Department figures showed in Washington.

The median projection in a Bloomberg News survey called for a December gain of 155,000. The unemployment rate unexpectedly fell to 8.5 per cent, the lowest since February 2009, while hours worked and earnings climbed.

Sustained payroll gains are needed to chip away at joblessness and support household spending, which accounts for about 70 per cent of the world's largest economy. The labour market figures follow recent data showing increased manufacturing and a rebound in consumer sentiment that show the US is weathering Europe's debt crisis.

"You got the trifecta — more people working, wages up and the average work week up," said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, who accurately forecast the December payrolls gain. "You can't really argue that that isn't a sign of significant improvement in the job market."

Last year

Employers added 1.64 million workers in 2011, the best year for the American worker since 2006, after a 940,000 increase in 2010. Even with the gains, little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009.

"The tide is beginning to come back in," James Glassman, senior economist at JP Morgan Chase & Co. in New York, said in a radio interview on Bloomberg Surveillance with Tom Keene and Ken Prewitt. "We've got a long way to go. This is all positive, though, that we're actually moving forward, and that's an important trend."

Bloomberg survey estimates of 86 economists for December ranged from increases of 80,000 to 220,000. Regular monthly revisions to prior reports subtracted a total of 8,000 jobs to payrolls in October and November.

The unemployment rate, derived from a separate survey of households, was forecast to climb to 8.7 per cent, according to the survey median.

Manufacturing sector strongest since 1997

Factory payrolls increased by 23,000, the strongest since July, after a 1,000 gain in the previous month. Manufacturing job growth last year was the strongest since 1997.

Employment at service-providers increased 152,000, with a 50,200 advance in the transportation industry that includes companies such as FedEx Corp. and United Parcel Service Inc. Last month's gain in transportation jobs was the biggest since September 1997. In December 2010, a 50,100 gain in the industry's payrolls was almost entirely reversed a month later.