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Unemployment rate falls to 8.5%; GOP still using jobs as battering ram (+video)

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The improvement in the jobs report was broad-based, with gains in transportation (50,000 new jobs), retail (28,000), manufacturing (23,000), health care (23,000), and food and leisure (24,000). Government jobs continued to be a drag on the economy, with a loss of 12,000 jobs in December.

The better numbers, economists say, may reflect recovery from many of the negative factors that had kept growth low: the earthquake and tsunami in Japan, which hurt the auto sector; the summer uncertainty as Congress debated raising the national debt ceiling; and the continuing saga in Europe over sovereign debt.

“It appears we are now back on track,” says John Canally, chief economist at LPL Financial in Boston. “Fed Chairman Ben Bernanke has said the economy was a little bit unlucky; now, maybe we’ll have a run of months without any bad luck.”

Improvement in the unemployment rate may also reflect a shift in the number of people looking for work. The total labor force has been steadily shrinking, observes Mr. Naroff. “This may indicate there are a lot of frustrated workers out there, or maybe people coming off the unemployment rolls because they have run out of benefits and are taking some time off, or maybe baby boomers starting to retire,” he says. “But I don’t think we need to be alarmed by this.” 

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