Unemployment rate falls. Job gains ease fears of new recession.

The unemployment rate fell to 8.6 percent last month, down from 9 percent. It's the latest sign that the US economy is steering clear of a new recession. Still, pitfalls linger.

Charlie Riedel/AP
Job seekers attend a career fair in Overland Park, Kan. on Thursday. The unemployment rate fell last month to its lowest level in more than two and a half years, as employers stepped up hiring in response to the slowly improving economy.

The US economy gained jobs and saw its unemployment rate fall in November, and those signals came on top of other recent signs suggesting that the nation is steering clear of a new recession.

Employers who report their payrolls to the government added 120,000 jobs for the month, with a gain of 140,000 in the private sector and a decline of 20,000 in government.

The unemployment rate fell to 8.6 percent, down from 9 percent in the Labor Department's October survey. Solid job gains, coupled with the less-inspiring trend of people dropping out of the work force, were key reasons the jobless rate improved.

Overall, the signs of healing in the labor market are an encouraging indicator at a time when economists see some significant risk that the economy could sink back into recession.

The risk hasn't receded entirely. A debt crisis in Europe has been weighing on US financial markets, creating a backdrop of uncertainty about possible contagion in the global banking sector. And some forecasters worry that, after the season of holiday spending passes, US consumer spending could falter early in the new year.

But for all the lingering worries, the good news for now is that the economy is marching forward on a path of at least modest growth.

"The US economy continues to show improvement even as the picture for the rest of the world deteriorates," Nigel Gault, an economist at the forecasting firm IHS Global Insight, said Friday in a written analysis. "The better domestic data," he said, means the risk of a US recession is now about 35 percent, down from a prior estimate of 40 percent. "That [danger] is still elevated because of the problems in the Eurozone."
Mr. Gault, based in Lexington, Mass., says the US economy should grow at an annualized pace of about 2.6 percent in the fourth quarter, but that the momentum may slacken to growth of about 1.8 percent in 2012.

Many forecasters share a similar outlook: no recession, but a pace of growth that may be disappointingly tepid.

A downturn in Europe weighs on the prospects for US exporters, while many American consumers still feel burdened by slow income growth and high debt levels.

The negative factors are matched, however, by some hopeful signs:

•US consumer confidence rebounded to a level of 56 in November, up from 40 a month earlier, according to the Conference Board's index. That's still weaker than in past economic recoveries, but Americans' concern eased about both the economy and their own personal finances.

•The National Federation of Independent Business reports a gain in the number of member firms that are hiring. It's not a huge surge, but the hiring plans are the strongest the group has seen in 38 months.

•This week, a gauge of activity among US manufacturers rose to a better-than-expected level. The Institute for Supply Management's index for November rose to 52.7, up from a barely positive reading of 50.8 a month before.

•Auto sales rose sharply across the US in November, carmakers reported this week.

•Although the housing market remains weak in general, a Federal Housing Finance Agency index of US home prices rose modestly in the latest month reported (September).

Friday's news from the Labor Department, meanwhile, brings the unemployment rate down to a level not seen since since March 2009. The department also revised upward its estimate of private-sector job gains in October.

The Obama administration framed the improvements with a note of caution. 

"The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision," said Alan Krueger, who chairs the White House Council of Economic Advisers. "It is important not to read too much into any one monthly report."

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