US unemployment drops to near 3-year low

Nonfarm payrolls increased 200,000 in December, the Labor Department said on Friday. It was the biggest rise in three months and beat economists' expectations for a 150,000 gain.

The unemployment rate fell from a revised 8.7 percent in November to its lowest level since February 2009, a heartening sign for President Barack Obama whose re-election hopes could hinge on the state of the labor market.

“The labor market is healing, but we still have a long way to go to recoup the losses we have endured. We may be close to a tipping point where gains can become more self-feeding,” said Diane Swonk, chief economist at Mesirow Financial in Chicago.

A string of better-than-expected U.S. data in recent weeks has highlighted a contrast between the recovery in the world's biggest economy and Europe, where the economy is widely believed to be contracting.

The dollar rose to a near 16-month high against the euro.

Republican presidential hopefuls have blasted Obama's economic policies as doing more harm than good. The latest economic signs, however, could offer him some political protection.

The economy added 1.6 million jobs last year, the most since 2006, and the jobless rate, which peaked at 10 percent in October 2009, has dropped 0.6 percentage point in the last four months.

Obama welcomed the news and urged Congress to extend a two-month payroll tax cut through 2012 to help sustain the recovery.

“We're moving in the right direction. When Congress returns they should extend the middle-class tax cut for all of this year, to make sure we keep this recovery going,” he said.

Long Road Back

Employment remains about 6.1 million below its pre-recession level and at December's pace of job growth, it would take about 2-1/2 years to win those jobs back. There are roughly 4.3 unemployed people for every job opening.

Unseasonably mild weather last month helped fuel a hefty gain in construction employment. Courier jobs also rose sharply, a move the Labor Department pinned on strong online shopping for the holiday season.

Those jobs could be lost in January and the unemployment rate might rise as Americans who had abandoned the hunt for work are lured back into the labor market.

The drop in the jobless rate was mostly due to strong hiring. The labor force shrank only modestly. A broad measure of unemployment, which includes people who want to work but have stopped looking and those working only part time but who want more work, dropped to an almost three-year low of 15.2 percent from 15.6 percent in November.

Still, all told, 23.7 million Americans are either out of work or underemployed.

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