US sees dramatic fall in unemployment level

US unemployment fell dramatically to 9.4 per cent in December, a boon for President Barack Obama but one tempered by signs the economy is still not creating enough jobs.

The Labour Department said the unemployment rate last month fell to its lowest level since May 2009, although many fewer jobs were created than expected.

Mr Obama cautiously welcomed the news: “We know these numbers can bounce around from month to month, but the trend is clear.”

“The economy added 1.3 million jobs last year. And each quarter was stronger than the previous quarter, which means that the pace of hiring is beginning to pick up.”

But he cautioned unemployment rate was still unacceptably high.

“You’ve still got a whole bunch of folks who are out there looking, still struggling. We’ve got a big hole that we’re digging ourselves out of.”

The sharp drop in unemployment from November’s 9.8 per cent rate blew most economists’ expectations out of the water.

But just 103,000 nonfarm jobs were created, many fewer than the 150,000 expected, reaffirming a trend of steady but unspectacular job growth.

Since December 2009, payrolls have grown by an average of 94,000 a month.

Federal Reserve chairman Ben Bernanke warned that the rate of growth is not enough to replace the 8.5 million jobs lost during the economic downturn.

“Payrolls expanded at an average of only about 100,000 per month in 2010 – a pace barely enough to accommodate the normal increase in the labour force and, therefore, insufficient to materially reduce the unemployment rate,” he told Congress.

“Considerable time likely will be required before the unemployment rate has returned to a more normal level,” he said in prepared Senate testimony.

The markets shared Mr Obama and Mr Bernanke’s cautious view of the jobs report, despite a string of other positive economic data.

“Despite the indications to the contrary, no light switch has been flipped as businesses continue to hire at a cautious pace,” said Joel Naroff of Naroff Economic Advisors.

All the major US indexes fell after the news.

The Labour Department reported that employment rose in the leisure, hospitality and health care sectors but “changed little in other major industries.”

Despite predictions of a bump in retail hiring to coincide with the Christmas sales, the retail trade added just 12,000 jobs.