Unemployment rate falls to 8.5%; GOP still using jobs as battering ram (+video)

With 11 months to go before the presidential election, the economy has finally started to produce more jobs.

The economy added 200,000 new jobs in December, the best showing since last spring, the Department of Labor reported Friday. The unemployment rate fell from 8.7 percent to 8.5 percent, its lowest level since February 2009.

The better jobs numbers immediately touched off a spate of claims from both political parties. The Obama White House said they indicate that the economy is continuing to “heal” from the worst downturn since the Great Depression. Republicans called the 8.5 percent jobless rate “shockingly high.”

Economists say the better data indicate the US economy is gradually improving, perhaps a sign that private businesses are becoming more confident. However, corporate confidence is tempered as executives watch events in Europe, where a recession may already be under way, and keep a wary eye on what is expected to be a relatively high level of foreclosures in the US for months to come.

“We need a lot stronger job gains for a longer period of time before we can say we have moved out of recovery and into full expansion mode,” says Joel Naroff of Naroff Economic Advisors in Holland, Pa. 

The improvement in the jobs report was broad-based, with gains in transportation (50,000 new jobs), retail (28,000), manufacturing (23,000), health care (23,000), and food and leisure (24,000). Government jobs continued to be a drag on the economy, with a loss of 12,000 jobs in December.

The better numbers, economists say, may reflect recovery from many of the negative factors that had kept growth low: the earthquake and tsunami in Japan, which hurt the auto sector; the summer uncertainty as Congress debated raising the national debt ceiling; and the continuing saga in Europe over sovereign debt.

“It appears we are now back on track,” says John Canally, chief economist at LPL Financial in Boston. “Fed Chairman Ben Bernanke has said the economy was a little bit unlucky; now, maybe we’ll have a run of months without any bad luck.”

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