Unemployment drops to 7%; 203,000 jobs added in November

Why the jobless rate is larger than you think 1:27

The U.S. economy added a better-than-expected 203,000 jobs in November, sending the unemployment rate down to 7 percent, the Bureau of Labor Statistics said on Friday.

Economists had expected the government to report about 180,000 new jobs, down from an initially reported 204,000 in October. The unemployment rate had been expected to decline a notch to 7.2 percent from 7.3 percent.

The positive numbers could pressure the Federal Reserve into easing the throttle on its $85 billion a month on bond purchases known as quantitative easing. The central bank has been watching labor developments closely, looking for stability that could allow it to exit its historically unprecedented easing policy.

"The labor market readings may be strong enough for the Federal Reserve to start the tapering of its quantitative easing in December," Kathy Bostjancic, director of macroeconomic analysis at The Conference Board, said in a statement. "These job gains are certainly enough to move the ball down the field over the winter months."

Stock futures surged higher following the report after an initial dip and bond yields jumped, with the 10-year yield moving to 2.91 percent.

The S&P 500 has been a seven-month winning streak for the day the jobs report is released. Each of those "Jobs Fridays" has seen the report top analyst estimates and has seen the stock market index gain an average of 0.78 percent, according to Bespoke Investment Group.

Investors, though, worry that too much economic growth would spur the Fed into a retreat. The Fed's stimulus policy has helped boost the market more than 160 percent from its March 2009 lows.

Total joblessness fell below 11 million for the first time since November 2008, while total employment swelled by 818,000 as furloughed federal workers went back to work after the government shutdown. The employment rolls had tumbled by 735,000 in October.

Broadly speaking, the November report was consistent with the past year, which has seen an average 195,000 new jobs per month.

The biggest employment gains came in professional and business services (35,000), transportation and warehousing (31,000) and health care, which added 28,000. Manufacturing contributed 27,000 new positions and retail was up 20,000.

Earnings notched higher by 4 percent to an average $24.15 an hour while the work week rose one-tenth to 34.5 hours.