US private sector continues to add jobs in November

The U.S. private sector employment saw the largest gain in three years in November, according to a report by ADP, but will not be sufficient to reduce the high unemployment rate plaguing the country.

Employment rose by 93,000 from October to November on a seasonally adjusted basis for the tenth consecutive month, the report stated.

The service sector saw the best job creation at 79,000 jobs during the month, followed by the good-producing sector at 14,000 jobs. Construction saw the smallest decline since June 2007 at 3,000 jobs.

Job gains have generally averaged 47,000 over the past ten months, which is not sufficient to lower the current unemployment rate of 9.6 percent. ADP expects the unemployment rate to remain above 9 percent for all of 2011.

Furthermore, given modest GDP growth in the second and third quarters, and the usual lag of employment behind GDP, it would not be surprising to see several more months of only moderate gains in employment even as the economic recovery gathers momentum, the report added.

Employment growth in the range of at least 150,000 to 200,000 is required for the unemployment rate to drop, Paul Ashworth, an economist at Capital Economics, said in a note.

The improvement doesn't change the view that the official non-farm payroll figures, which are due on Friday, will show a 130,000 gain in November, he added.

The U.S. government is anxious about the low rate of job creation and disinflation plaguing the economy. The U.S. Federal Reserve announced a second round of quantitative easing early in November of $600 billion.

While the QE2 has drawn criticism from several countries and policy makers in the U.S. itself, it is expected to help reduce the unemployment rate by half a percentage point by 2012.

Households and financial institutions remain under considerable balance sheet pressure, which is only getting worse now that house prices are falling again, Ashworth said.

Till those pressures decline, maybe in a couple of years, GDP growth will stagger along at 2 percent per year, which would be consistent with only modest employment growth and no meaningful drop in unemployment rate, he added.