U.S. adds 155,000 jobs, jobless rate stays at 7.8%

An advertisement in the classified section of the newspaper calls attention to possible employment opportunities. (AP Photo/Steven Senne, File)

An advertisement in the classified section of the newspaper calls attention to possible employment opportunities. (AP Photo/Steven Senne, File)

WASHINGTON — U.S. employers added 155,000 jobs in December, a steady gain that shows hiring held up during the tense negotiations to resolve the fiscal cliff.

The solid job growth wasn't enough to reduce the unemployment rate, which remained 7.8 percent last month, the Labor Department said Friday. The rate for November was revised up from an initially reported 7.7 percent.

Each January, the government updates the monthly unemployment rates for the previous five years. The rates for most months don't change.

The government said hiring was stronger in November than it first estimated. November's job increases were revised up 15,000 to 161,000. October's increase was nearly unchanged at 137,000.

The "gain is perhaps better than it looks given that firms were probably nervous about adding workers with the fiscal cliff looming," said Paul Ashworth, an economist at Capital Economics.

Even so, hiring hasn't been strong enough to quickly reduce still-high unemployment. The job gains for December almost exactly matched the average monthly pace for the past two years. Hiring has been steady but modest as the economy has gradually improved.

For 2012, employers added 1.84 million jobs, an average of 153,000 jobs a month, roughly matching the job totals for 2011.

Robust hiring in manufacturing and construction fueled the December job growth. Construction firms added 30,000, the most in 15 months. That increase likely reflected hiring needed to rebuild after Superstorm Sandy and also gains in home building that have contributed to a housing recovery.

Manufacturers added 25,000 jobs, the most in nine months.

Other higher-paying industries also added jobs. Professional and business services, which include positions in information technology, management and architecture, gained 19,000. Financial services added 9,000, health care 55,000.

Lower-paying industry sectors were mixed. Restaurants and bars added 38,000 jobs. Retailers cut 11,300, a sign that the holiday shopping season might have been sluggish. But those cuts followed three months of strong gains.

All the job gains last month came from private employers. Governments shed 13,000 jobs, mostly in local school systems.

The stable hiring pace last month shows that employers didn't panic during the high-stakes talks between Congress and the White House over tax increases and spending cuts that weren't resolved until New Year's.

That's an encouraging sign for the coming months, because an even bigger federal budget showdown is looming. The government must increase its $16.4 trillion borrowing limit by around late February or risk defaulting on its debt. Republicans will likely demand deep spending cuts as the price of raising the debt limit.

Friday's report did point to some weakness in the job market. For example, the number of unemployed actually rose 164,000 to 12.2 million. Approximately 192,000 people entered the work force last month, but most of them didn't find jobs.

The unemployment numbers come from a government survey of households; the number of jobs added each month comes from a separate survey of businesses.

A broader category that includes not only the unemployed but also part-time workers who want full-time jobs and people who have given up looking for work was unchanged in December at 22.7 million.

Despite the still-modest job growth, the economy is improving. Layoffs are declining. And the number of people who sought unemployment aid in the past month is near a four-year low.

The jobs report showed that hourly pay is staying slightly ahead of inflation. Hourly wages rose 7 cents to $23.73 last month, a 2.1 percent increase compared with a year earlier. Inflation rose 1.8 percent over the same period.

The once-depressed housing market is recovering. Companies ordered more long-lasting manufactured goods in November, a sign that they're investing more in equipment and software. And Americans spent more in November. Consumer spending drives nearly 70 percent of economic growth.

Manufacturing is getting a boost from the best auto sales in five years. Car sales jumped 13 percent in 2012 to 14.5 million. And Americans spent more at the tail end of the holiday shopping season, boosting overall sales that had slumped earlier in the crucial two-month period.

Most economists expect little improvement this year. A 2 percentage point cut in the Social Security tax expired Jan. 1. That means a household with income of about $50,000 will have about $1,000 less to spend. And the government will may impose spending cuts this year.

Both the higher taxes and spending cuts, along with uncertainty about the future budget fights, will likely restrain growth and hiring.

That "likely means acceleration in the labor market will remain elusive for the time being," said Ellen Zentner, an economist at Nomura Securities.

EARLIER:

U.S. report: Steady hiring expected despite fiscal cliff

WASHINGTON — U.S. employers likely kept hiring last month at a modest but steady pace, despite tense negotiations that pushed the economy to the brink of the fiscal cliff.

Economists forecast that employers added 155,000 jobs in December, according to a survey by FactSet. That would be slightly higher than November's 148,000. The unemployment rate is projected to remain at 7.7 percent.

Stable hiring would mean the job market held up during the talks between Congress and the White House over tax increases and spending cuts that were not resolved until the new year.

A trio of encouraging reports Thursday on private hiring and layoffs suggested companies did not panic last month, although the Labor Department report will offer a more accurate measure of how businesses responded to the uncertainty in Washington.

"Given that we have restraints, the labor market data do appear to be improving," said Dana Saporta, an economist at Credit Suisse.

While Congress and the White House reached a deal this week that removed the threat of income tax increases on most Americans, they postponed the more difficult decisions on cutting spending. And the government must also increase its $16.4 trillion borrowing limit by around late February or risk defaulting on its debt.

Congressional Republicans are pressing for deep spending cuts in return for any increase in the borrowing limit. President Barack Obama has repeatedly said he wants the issues kept separate.

Depending on December's figure, hiring may finish the year slightly below its 2011 pace.

Employers added 1.84 million jobs in 2011, the most in five years. In the first 11 months of 2012, employers added 1.67 million. Job gains would have to top 170,000 in December to push 2012 ahead of the previous year. Some economists do expect gains at that level or higher.

On a monthly basis, the differences are slight. Job gains averaged 151,500 a month in the first 11 months of 2012, compared with 153,000 in 2011.

Hiring probably won't rise above the current 150,000 per month trend until after the borrowing limit is resolved, economists say.

A similar fight over raising the debt ceiling in 2011 was only settled at the last hour and nearly brought the nation to the brink of default.

"That's not an environment where you're likely to be taking risks," such as adding jobs, said Nigel Gault, chief U.S. economist at IHS Global Insight.

Reports Thursday indicated the job market is improving slightly.

The most encouraging sign came from payroll provider ADP. Its monthly employment survey showed businesses added 215,000 jobs last month, the most in 10 months and much higher than November's total of 148,000.

Economists tend to approach the ADP survey with some skepticism because it has diverged sharply at times from the government's job figures.

But some economists were also hopeful after seeing businesses were less inclined to cut jobs last month.

Outplacement firm Challenger, Gray & Christmas said that the number of announced job cuts fell 43 percent in December from November, and overall planned layoffs in 2012 fell to the lowest level since 1997.

The decline in layoffs coincided with a drop last month in the number of people who applied for unemployment benefits. The four-week average was little changed at 360,000 last week. That's only slightly above the previous week's 359,750, which was the lowest since March 2008.

Still, the unemployment rate remains high. It fell to 7.7 percent in November from 7.9 percent in October. But that was mostly because many of the unemployed stopped looking for jobs. The government counts people as unemployed only if they are actively searching for work.

There are signs the economy is improving. The once-battered housing market is recovering, which should lead to more construction jobs this year. Companies ordered more long-lasting manufactured goods in November, a sign they are investing more in equipment and software. And Americans spent more in November. Consumer spending drives nearly 70 percent of economic growth.

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