Employers add 200,000 jobs, unemployment at 8.5%
A line worker assembles an engine for a Ford Focus at the Ford Michigan Assembly plant in Wayne, Mich., in December. The number of people applying for unemployment benefits dropped to its lowest level since April 2008, it was announced on Jan. 6. (Dec. 14, 2011) Credit: AP
WASHINGTON -- Four painful years after the Great Recession struck and wiped out 8.7 million jobs, the United States may finally be in an elusive pattern known as a virtuous cycle -- an escalating loop of hiring and spending.
The nation added 200,000 jobs in December in a burst of hiring that drove the unemployment rate down to 8.5 percent, its lowest point in almost three years, leading economists to conclude that the improvement in the job market might just last.
"There is more horsepower to this economy than most believe," said Sung Won Sohn, an economics professor at California State University, Channel Islands. "The stars are aligned right for a meaningful economic recovery."
It was the sixth month in a row that the economy added at least 100,000 jobs, the longest streak since 2006. The economy added jobs every month last year, the first time that has happened since 2005.
And the unemployment rate, which peaked at 10 percent in October 2009 and stood at 9.1 percent in August, has fallen four months straight. It was 8.7 percent in November.
If economics textbooks and the best hopes of millions of unemployed Americans are confirmed, the virtuous cycle may be under way, which would suggest the job market will continue to strengthen.
When people are hired, they have more money to spend. That means greater demand for goods and services, which results in businesses hiring even more people. That results in even more spending and leads to even more hiring.
The economy added 1.6 million jobs in 2011, better than the 940,000 added in 2010. In 2009, the most bruising year of the Great Recession, the nation lost more than 5 million jobs.
The unemployment report was the first to be released since Republicans began voting to determine a candidate to face President Barack Obama this fall in an election that will turn on the economy.
Obama, a Democrat, appears bound to face voters with the highest unemployment rate of any president running for re-election since World War II. Unemployment was 7.8 percent when Obama took office.
But the president's re-election chances may hinge more on the direction of the unemployment rate than on what the rate is come Election Day. The rate was a still-high 7.2 percent when Ronald Reagan beat Walter Mondale in 1984, but it had fallen from 10.8 percent two years earlier.
