Economy adds 200K new jobs, unemployment falls to 8.5 percent

The economy added 200,000 jobs in December and the jobless rate fell to 8.5 percent, signaling a growing economy that could give a political boost to President Obama in his reelection year.

The 8.5 percent unemployment rate is the lowest the jobless rate has been in three years, and the positive jobs figures suggest the labor market is starting to expand more strongly after years of sluggish growth.

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The report from the Bureau of Labor Statistics follows a positive report on Thursday from ADP, which found private companies added 325,000 jobs. Weekly jobless claims have also dropped in recent weeks.

Obama is expected to discuss the numbers during comments later Friday morning at the Consumer Financial Protection Bureau.

The visit to the bureau is a bit of a victory lap for Obama, and the job figures are sure to add to confidence in the White House.

Obama defied Republicans and recess-appointed Richard Cordray to head the new consumer bureau this week in a move business groups have said will likely draw lawsuits, since Republicans argue the Congress was not technically out of session.

In their initial responses to the jobs figures, Republicans said it was good news that more people were finding work but criticized Obama and Senate Democrats for holding back more growth.

Speaker John Boehner (R-Ohio) said in a statement that Obama and Senate Democrats should have agreed to a full-year extension of the payroll tax cut. That tax cut was extended for two months after the two parties could not agree on how to pay for a full-year extension.

More broadly, Boehner criticized Democrats for not passing jobs bills approved by the House.

“The House has passed nearly 30 jobs bills that remain stuck in the Democratic-controlled Senate," Boehner said. "These bills, which passed the House with bipartisan support, would end some of the uncertainty facing small businesses and help create an environment where robust private-sector job growth is once again the norm."

Democrats fired back by arguing that Republicans had created a crisis in December when they bickered over whether to extend the tax cut for two months. Senate Republicans agreed to that deal, but House Republicans threatened to hold it up before caving under pressure from their colleagues in the upper chamber.

"We can't afford any more Republican made-up crises that hurt our middle class,” said House Minority Leader Nancy Pelosi (D-Calif.) in a statement. “And we can't wait any longer to act to create jobs and strengthen our economy, starting with a full-year extension of the payroll tax cut that puts more money back in the pockets of working families."

Senate Majority Leader Harry Reid (D-Nev.) said: “I hope my Republican colleagues have learned from their recent mistakes, and will begin the new year focused on working with Democrats to create jobs, instead of scoring political points against President Obama.”

December's job gains were seen across the economy.

Manufacturing and the healthcare industry added 23,000 jobs, while transportation and warehousing added 50,000. Retailers tallied 28,000 jobs and the embattled construction sector added 17,000 workers. Mining employment rose by 7,000 over the month.

Government employment changed little over the month but fell by 280,000 during the year. Job losses occurred in local and state government, excluding education, and at the U.S. Postal Service, which could see more job cuts this year in response to billions in budget deficits.

The bureau revised figures for November down by 20,000, but revised figures for October up by 12,000. It also reported increases in the average hourly workweek and average earnings.

Workers saw their wages tick up slightly in December, by 0.2 percent to $23.24. In the past year, average hourly earnings have increased by 2.1 percent.

The economy has added at least 100,000 jobs or more for the past six months. But this is just enough to keep up with population growth and will not dramatically bring down the unemployment rate.

Millions of people have left the workforce, and as they return it will put more pressure on the economy to create even more jobs.

In early 2009, the economy was shedding 600,000 to 800,000 jobs per month.

"Even at December’s growth rate, it would still take about seven more years to fill the gap and get back to the pre-recession unemployment rate," said Heidi Shierholz, an economist with the Economic Policy Institute.

"We need reports this strong and stronger for many years to come to bring our labor market back to health."

This story was posted at 8:38 a.m. and updated at 10:20 a.m.