U.S. labour market improves

There’s more good news on the labour front in the U.S. today, as the number of Americans applying for unemployment benefits fell last week to the lowest level in nine months. New applications dropped by 23,000 to a seasonally adjusted 381,000, according to the Labor Department.

The four-week average, a less volatile measure, fell for the ninth time in 11 weeks to 393,250—the lowest it’s been since April. If applications drop below 375,000—consistently—that would be seen as a sign of a falling unemployment rate.

The unemployment rate fell to 8.6% in November—the lowest in two and half years—down from 9% the previous month. But much of that improvement may be illusory, as more people gave up looking for work and were therefore not counted as unemployed.

Employers added a net total of 120,000 jobs last month. The economy has generated 100,000 or more jobs five months in a row–the first time that has happened since April 2006.

Many economists expect economic growth to accelerate in the final three months of the year, to about a 3% annual rate. That would be an improvement from 2% growth in the July-September period.

But the U.S. economy is vulnerable to shocks from overseas. European leaders are struggling to contain a two-year old debt crisis and the 17 nations that use the euro may already be in recession, economists say.

That could slow U.S. exports and cut into overseas profits earned by U.S. multinationals. Even worse, the crisis could force European banks to cut back on lending and U.S. banks to follow suit, leading to a credit crunch. Most economists are penciling in slower U.S. growth next year, partly because of Europe’s slowdown.