American employers finally are hiring at a pace that will begin to lower the country's elevated unemployment rate, the best evidence to date that the economic recovery is gaining traction.
The U.S. jobless rate fell to 8.9 per cent in February, almost a full percentage point decline since December, making it the fastest drop since 1983, according to National Bank Financial. The unemployment rate dropped below 9 per cent for the first time since April, 2009, ending the longest period of monthly joblessness at that level or higher on U.S. Labour Department records dating back to 1948.
"Confidence is coming back," said Andrew Schuman, president and chief executive officer of Denver-based Hammond's Candies, who plans to add about 60 workers this year to help keep up with demand for his handmade candy bars and chocolates from customers in the United States and Canada, including Whole Foods Market and Indigo Books & Music Inc. "It's slow, but I do see the consumer spending a little bit more."
A separate survey released by the U.S. Labour Department on Friday showed company payrolls increased by 192,000 last month, the most since May. Hiring in the private sector rose by 222,000, which accelerated the three-month trend to an average of 152,000 new jobs a month from 121,000 in January. An index that measures the share of industries showing job gains climbed to 68.2, the highest since May, 1998.
The rebound in the U.S. labour market is at an early stage and will need to continue for at least another few months to fully convince policy makers such as U.S. Federal Reserve Board chairman Ben Bernanke that the economy is strong enough to survive without government life support.
Mr. Bernanke told lawmakers in testimony this week that there are "some grounds for optimism" that hiring is picking up, although he reiterated that it "could be several years" before the unemployment rate returns to a more normal level.
The U.S. economy lost almost nine million jobs from early 2008 through 2009, and recovered only one million of them in 2010.
According to the Hamilton Project, an economic policy group attached to the Washington-based Brookings Institution, it would take five years to replace all the jobs eliminated since December, 2007, with payrolls increasing at a rate of 321,000 a month - the monthly average of the best year of job creation in the 1990s.
At a pace of 208,000 jobs a month, which is the average of the best year of hiring in the 2000s, it would take until June, 2023, to close the job gap.
"We have a long journey back," Josh Feinman, chief economist at DB Advisors, the institutional asset management arm of Deutsche Bank, said from New York. "It's slow, but we are moving in the right direction."
U.S. stocks tumbled after posting the biggest rally in three months on Thursday. Some analysts were expecting a payroll figure greater than 200,000.
The U.S. Labour Department report showed that wages were unchanged in February, suggesting that consumers will struggle to cope with higher gasoline and food prices. Crude rose as much as 2.9 per cent Friday, breaching $104 (U.S.) a barrel.
The Labour Department revised its payroll figures from January and December, adding an additional 58,000 jobs, putting the three-month average at 135,000.
Some economists predicted the unemployment rate will jump back to levels greater than 9 per cent in the months ahead.
One reason is that the current rate of decline appears too good to be true: Economists at Bank of America Merrill Lynch noted that at the current pace, the unemployment rate would drop below 6 per cent by the end of the year.
Also, the size of the labour force has been little changed in recent months, which suggests that many of those millions who lost their jobs in the recession remain discouraged and on the sidelines. As the economy continues to improve, they likely will resume looking for work, which would put upward pressure on the unemployment rate.