US unemployment tumbles to 8.6%, lifting hopes

  The troubled US economy and President Barack Obama's embattled administration received a substantial confidence boost on Friday, as unemployment sank to a 32-month low of 8.6 percent in November. Official figures showed the jobless rate fell sharply from 9.0 percent the previous month, as the economy created 120,000 new jobs. After a year that saw joblessness linger around 9.0 percent, the report was welcomed with relief. "Woo-hoo!" said Robert Brusca, chief economist at FAO Economics. "The jobs numbers are looking better." Analysts also pointed to upward revisions of past reports as evidence that the strength of the labor market has been understated for months. But while the Labor Department's report was one of the strongest since the global economic crisis began in 2008, it was not uniformly positive. Economists pointed to a worryingly sharp drop in the number of people looking for work -- which helped push down the unemployment rate further than would have been the case. That could mean more and more jobseekers feel defeated by the relentless slog of finding a new position and are dropping out of the hunt all together. "The drop in the unemployment rate was caused in part by a decline in the labor force of 300,000," said Jeffrey Rosen of Briefing.com. "If the labor force had remained at October levels, though, the unemployment rate would still have fallen to 8.8 percent." There were other blemishes. The net creation of 120,000 jobs was not as strong as expected, as government job cuts continued to eat into private sector gains. The net gain was below the average 131,000 of the past 12 months. But amid renewed global turmoil, the report offered a glimmer of hope that the United States is on the way to reassuming its role as an anchor for the world economy. "Something good is stirring in the US economy," said Ian Shepherdson, chief US economist with High Frequency Economics. The news could also provide a boost to Obama's hopes of reelection next November, giving him some defense against Republican claims that he has failed to get the economy back on track since the recession ended more than two years ago. The unemployment rate now stands only slightly above the 8.5 percent rate that president Ronald Reagan faced at the same point during his successful 1984 reelection campaign. But with recent data proving a sharp drop in unemployment can easily be reversed, Obama was careful not to declare victory prematurely. "Despite some strong headwinds this year, the American economy has now created, in the private sector, jobs for the past 21 months in a row," Obama said, sounding a note of cautious optimism. "That's nearly three million new jobs in all and more than half a million over the last four months," he said. "We need to keep that growth going." Obama and his advisers will also be acutely aware that his efforts can be eroded by the financial crisis sweeping Europe. "There are still real risks to the economy that the President has to be careful of, even as he welcomes good headlines," said Matt McDonald, a former White House advisor now at Hamilton Place Strategies "For Republicans, the challenge will be to avoid the image of cheering down the economy as it fumbles along." Attempting to press home the advantage, Obama demanded Republicans back renewing soon-to-expire payroll tax cuts, which the administration says will help stimulate the economy. Both sides, eager to court voters angry at the sour US economy ahead of the November 2012 elections, say they agree on extending the cut but differ bitterly on how to pay for it in an era of yawning government budget deficits. But in a signal of the White House's determination to push the issue, Obama said lawmakers may have to stay in Washington until a deal is done. "I expect that it's going to get done before Congress leaves, otherwise Congress may not be leaving. We can all spend Christmas here together." "We're going to keep pushing Congress to make this happen," he said. Republican lawmakers said the drop in unemployment was not enough. "Any job creation is welcome news, but the jobless rate in this country is still unacceptable," said John Boehner, speaker of the Republican-controlled House of Representatives. "The president's policies have failed."