Job creation steady in December, unemployment at 7.8%

January 4, 2013

The job market continued to make steady gains in the final weeks of 2012, as employers apparently shrugged off the standoff in Washington over the fiscal cliff and kept hiring.

Employers added 155,000 jobs in December, the Labor Department said, which is close to analysts' forecasts and consistent with job growth over the last several months. The unemployment rate was 7.8 percent in December, unchanged from its revised level in November (that month's jobless rate had previously been reported at 7.7 percent).

Both numbers point to a labor market that is getting stronger but not particularly rapidly. The economy in December was what we thought it was: trudging along consistently.

The gain of 155,000 jobs last month varies little from the average pace of increase over the last three months (151,000 jobs a month), or the last six months (160,000), or the full year 2012 (153,000). At that pace, U.S. unemployment should shrink slowly but steadily over time.

The new numbers showed that employers were not especially worried about the "fiscal cliff" -- the series of tax increases and spending cuts that were scheduled to take effect Jan. 1 but which was averted at the last minute earlier this week -- and did not ratchet back hiring on any large scale. While many executives voiced fear and annoyance at the hijinks in Washington over the standoff, the down-to-the-wire debate did not, from this report at least, appear to translate into fewer jobs.

Markets were little changed, reflecting analysts expectations for the report. The Standard & Poor's 500 index was down 0.2 percent at 9:45 a.m.

"While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression," said Alan Krueger, the chief White House economist, in a statement Friday morning.

In his statement, House Speaker John Boehner (R-Ohio) said, "Too many Americans are still out of work and Washington has too much debt," and he advocated spending cuts and changes to entitlement programs.

The details of the report paint a solid but uninspiring picture. The unemployment rate was driven by a combination of more people entering the labor force, 192,000 of them, a gain not matched by the number of people reporting having a job. If that pattern were to continue, it would eventually push the jobless rate up even as employers create new positions. A broader measure of unemployment, which captures people working part time who want a full-time job and those who have given up looking for work out of frustration, was unchanged at 14.4 percent.

The job gains were relatively broad, with an 25,000 rise in manufacturing employment and a 30,000 gain in construction jobs. Those might, in part, reflect a ramp-up in activity to rebuild after Hurricane Sandy, but the increase in particular is a welcome change after months in which the sectors job tally hasn't kept up with a rise in homebuilding.

The biggest job increases, as has often been the case in the past several years, were in education and health care, a sector that added 65,000 positions.

The retail sector cut 11,000 positions, but that only partly reversed steep October and November gains and likely reflects the odd seasonal patterns created by an early Thanksgiving. Government kept to its role as a drag on growth, shedding 13,000 positions.

There was good news about wages and hours worked. The average workweek for nonmanagerial employees ticked up to 34.5 hours, from 34.4, and average hourly earnings rose seven cents to $23.73. Overall, the index of aggregate weekly payrolls rose 0.7 percent.

Put together, it is not a report that should cause celebration in the streets for the millions of unemployed Americans, but it does reassure us that the expansion is on track.

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