The U.S. wrapped up a third year of employment growth with a gain in December, showing the world’s largest economy was able to endure an intensifying budget battle on Capitol Hill.
Employers added 155,000 workers last month after 161,000 in November, Labor Department figures showed yesterday in Washington. The jobless rate held at 7.8 percent, matching an almost four-year low, after the November figure was revised up from a previously reported 7.7 percent.
The advance in hiring was accompanied by a bigger-than- projected gain in wages and a longer workweek that will give households the means to sustain spending, benefiting retailers from Macy’s Inc. (M:US) to Gap Inc. (GPS:US) The Standard & Poor’s 500 Index closed yesterday at the highest level since December 2007 on signs an improving jobs picture will help soften any blow to the economy from higher payroll taxes.
“Job growth here is just very steady,” James Glassman, senior economist at JPMorgan Chase & Co. in New York, said yesterday during a radio interview on “Bloomberg Surveillance.” The challenge “is how the rise in the payroll tax affects the consumer, because that is probably a bit of a headwind. Once we are over that, I think there is every reason to believe that the economy should do better than last year.”
The S&P 500 added 0.5 percent to 1,466.47 at the close in New York, putting the gain for the week at 4.6 percent. The index soared 2.5 percent on Jan. 2 after Republicans and Democrats agreed on a compromise budget that avoided the so- called fiscal cliff of sweeping tax increases slated to take effect this year.
Next, Republican leaders in the House are vowing to exact deep spending cuts from President Barack Obama and the Democrats in exchange for raising the debt ceiling as the U.S. Treasury bumps up against its legal borrowing limit.
The jobs report “provides further evidence that the U.S. economy is continuing to heal,” Alan Krueger, chairman of the White House Council of Economic Advisers, said in a statement. “It is important that we continue to move toward a sustainable federal budget in a responsible way that balances revenue and spending while protecting critical investments in the economy and essential support for our most vulnerable citizens.”
A pickup in employment was also evident in a report yesterday on the service industries, which account for almost 90 percent of the economy. The Institute for Supply Management’s non-manufacturing index climbed to 56.1 in December, the highest in 10 months, from 54.7 in November. Readings above 50 signal expansion.
The Tempe, Arizona-based group’s employment gauge rose to the highest level since March, while orders grew at the strongest pace in 10 months.
The increase in U.S. employment was in line with the 152,000 median estimate of 82 economists surveyed by Bloomberg before the Labor Department’s figures.
For all of 2012, the economy created 1.84 million jobs, matching the gain in 2011. It’s the best back-to-back reading since 2005-2006.
Rod Prince landed a new position last month as a senior database administrator for Sausalito, California-based Glassdoor, a jobs and career website. In the four weeks leading up to his hiring, Prince said he received phone calls about six different openings.
“I now feel pretty confident,” said Prince, 59. “I don’t have to pinch money. I feel the economy is doing better.”
In managing databases for Glassdoor, Prince said job listings are “accelerating quite significantly.”
Payroll gains were broad-based with construction firms, manufacturers, health-care companies and restaurants all adding staff in December, the Labor Department’s data showed.
Nonetheless, the increases probably don’t satisfy some of the policy makers at the Federal Reserve, who last month said they will keep pumping money into the economy until the job market improves “substantially.”
Central bankers on Dec. 12 expanded a third round of so- called quantitative easing and said they would hold their target interest rate low “at least as long” as the unemployment rate remains above 6.5 percent and inflation projections are for no more than 2.5 percent.
“News on the unemployment rate was not quite as good as other parts of the report,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, who accurately projected the December payrolls figure. “The Fed has the green light to continue with its quantitative easing.”
The jobless rate for all of 2012 was 8.1 percent, the lowest annual average in four years.
Federal Reserve Bank of St. Louis President James Bullard said that he sees the possibility of unemployment dropping to 7.1 percent by the end of this year.
“I think that unemployment will continue to tick down through 2013,” Bullard said yesterday in an interview on CNBC. A 7.1 percent rate “would probably be substantial improvement” in the labor market, he said, referring to the Fed’s goal for halting its open-ended monthly purchases.
Yesterday’s report also showed hourly earnings climbed to $23.73 on average in December, increasing by 0.3 percent for a second month and beating the median forecast of economists surveyed by Bloomberg that called for a 0.2 percent advance. They rose 2.1 percent from December 2011, the biggest gain in a year. Additionally, the work week climbed six minutes to 34.5 hours.
Factory payrolls increased by 25,000, the most since March, yesterday’s report showed. Employment at private service- providers increased 109,000.
Winnebago Industries Inc. (WGO:US), a Forest City, Iowa-based maker of motor homes, was among companies expanding to increase production. It hired about 160 people, or 12 percent more hourly employees, in the quarter ended Dec. 1.
“We’re still supplementing by working overtime in many, many areas of the company,” Sarah Nielsen, chief financial officer, said on a Dec. 20 earnings conference call. “That’s been a factor for the last six months plus.”
The jobs report showed construction companies added 30,000 workers, the most since September 2011. The figures may have received a boost from rebuilding efforts following superstorm Sandy, which left about 8 million homes and businesses without power for days after making landfall on Oct. 29.
Progress in the labor market is driving Americans’ confidence and spending. Macy’s, the second-biggest U.S. department-store company, reported a 4.1 percent rise in December sales at stores open at least a year, while Gap, the largest U.S. specialty-apparel retailer, had a 5 percent increase.
To contact the reporter on this story: Shobhana Chandra in Washington at email@example.com
To contact the editor responsible for this story: Christopher Wellisz at firstname.lastname@example.org