Your Economy (No Politics)

[Bullwinkle]

December Payrolls Rise by 108,000 Jobs
by Courtney Schlisserman in Washington


Jan. 6 (Bloomberg) -- U.S. employers added 108,000 workers in December, capping a year in which the economy shook off the effects of hurricanes and surging energy prices to gain more than 2 million jobs.

The unemployment rate fell to 4.9 percent from 5 percent and labor costs rose, the Labor Department said today in Washington. The December gain followed figures showing 71,000 more jobs than first reported for November and October.

The U.S. gained workers each month in 2005. President George W. Bush, whose approval ratings sank last year, and his economic advisers fanned out to 19 states today to say the labor market shows his policies are working. Business spending and job growth may aid the economy in 2006 as higher interest rates slow the housing market, economists said.

``We're carrying firm momentum into 2006 which is likely to be sustained over the course of the year,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland.

December's increase was less than the 200,000 median forecast of 62 economists in a Bloomberg News survey. The number of jobs in November was revised up 305,000 from the 215,000 the government first reported. October's figure was lowered, leaving the net of 71,000 more jobs for those two months.

``It's pretty darn close to the consensus number'' once all the revisions are considered, DeKaser said.

Wages and Fed

The average hourly wage rose 3.1 percent last year, the biggest increase since 2002, and 0.3 percent for the month. The drop in the unemployment rate and rising wages support Federal Reserve policy makers' concerns that an improving job market may contribute to inflation.

The benchmark 10-year U.S. Treasury note fell 5/32 point, pushing its yield up 2 basis points to 4.37 percent at 4:15 p.m. in New York. The Fed is forecast to raise its benchmark interest rate for a 14th straight time on Jan. 31, to 4.5 percent.

Employers created 2.02 million jobs in 2005, today's report showed. That compares with 2.194 million jobs in 2004, which was the most since 1999.

The unemployment rate, which the department determines through a sampling of households instead of employers, was forecast to hold at 5 percent in the Bloomberg survey. The 0.5 percentage point decrease in the rate last year was the biggest one-year decline since 1997.

Services and Manufacturing

Service industries, which include retailers, banks and government agencies, added 96,000 workers last month after a 252,000 gain November. Manufacturers added 18,000 in December, the most since August 2004, compared with 8,000 a month earlier. The median forecast was for factory jobs to be unchanged.

``Retailers and construction companies just weren't hiring last month,'' said Richard Yamarone, chief economist at Argus Research Corp. in New York, who had the lower payroll estimate in the Bloomberg survey at 130,000. ``Retailers did less hiring this holiday season.''

Retailers lost 15,600 jobs last month, after increasing by 12,700 in November. Employment at construction firms, which surged after the hurricanes, declined by 9,000 last month, the biggest drop since February 2003.

The Federal Reserve is forecast to raise its benchmark interest rate this month for the 14th time since June 2004, part of its effort to control inflation as the economy and labor market strengthen.

White House Push

Bush and about two dozen members of his Cabinet and economic team spoke across the country today in an effort to remind voters they have overseen 10 consecutive quarters with annual growth rates of 3 percent or more. Bush said the economy is being propelled by tax cuts that should be made permanent this year.

``Cutting taxes helps people find a job,'' Bush said in a speech to the Economic Club of Chicago. ``The American economy heads into 2006 with a full head of steam. The American consumer is confident.''

Administration officials stepped up their defense of the economy in November after Bush's approval rating fell below 40 percent in polls by the Gallup Organization and other groups. Bush's rating improved to 43 percent in the latest Gallup poll.

``We have room to bring the unemployment number down,'' Treasury Secretary John Snow said in an interview while visiting the New York Stock Exchange. ``It is already lower than the average in the '70s, '80s and '90s, but I'm confident we can continue to make progress.''

Democratic lawmakers including Senator Charles Schumer of New York say Americans are being hurt by rising prices, such as those for gasoline, health care and college tuition.

``Unfortunately, the record they're touting is not the reality for most Americans,'' Schumer said. ``Life is getting tougher for the average American, not better.''

Hurricane Recovery

Even with the higher reading for November, the fourth quarter was the weakest of the year for job growth. Hurricanes Katrina in August and Rita in September threw thousands of people out of work, caused energy prices to rise and made companies more wary about adding to costs.

``We're going to get some extra employment growth as people displaced by the hurricanes find their way back into the job market, and that's likely to continue in the first few months of this year,'' said David Resler, chief economist at Nomura Securities International Inc. in New York.

Temporary-help agencies added 9,000 workers in December. Technology staffing company Anteo Group, based in Atlanta, expects business to grow 40 percent in this year's first half.

``The market for technology folks, certainly for consulting, is very strong and is as strong as it has been the last three or four years,'' Anteo President Dion DeLoof said in an interview.

Wages and Hours

Fed policy makers are watching employment figures for signs that slack in the labor market is being removed and that pressure to raise wages is increasing.

Average weekly hours for production workers fell by six minutes to 33.7 hours, lower than the 33.8 hours forecast by economists in the Bloomberg survey. The manufacturing workweek declined by to 40.7 hours and overtime held at 4.5 hours.

Workers' average hourly earnings increased by 5 cents to $16.34, a 0.3 percent increase from November that exceeded the median forecast of 0.2 percent. Average weekly earnings were $550.66, up 6 cents from November. The earnings data is for non- supervisory production workers. Both hourly and weekly earnings rose 3.1 percent from a year earlier.

Some companies continue to reduce their workforce. Royal Ahold NV, the owner of Giant and Super Stop & Shop supermarket chains in the U.S., plans to eliminate about 700 positions at its U.S. Foodservice unit, the company said on Dec. 30.

Business Spending

Business investment in new equipment and employment probably will play a larger role in economic growth this year. That will help support consumer spending as higher mortgage rates making mortgage refinancing less attractive, taking away a key support of spending in the past few years.

The economy probably grew at a 3.3 percent annual rate in the fourth quarter and it will accelerate the first three months of this year to 3.8 percent, according to a Bloomberg survey taken last month. The Commerce Department is scheduled to release the fourth-quarter report Jan. 27.

In part because of lower fuel prices, measures of confidence rose in December for both consumers, whose spending accounts for about 70 percent of the economy, and for chief executive officers.

The Conference Board research group's measure of consumer confidence rose to the highest level since August, and the Business Roundtable index of CEO's outlooks released Dec. 14 was the highest since the survey began in 2002. That survey also showed 56 percent of executives expect to boost capital spending to increase in the next six months.

``Corporate America is very optimistic right now,'' John Thain, chief executive of the New York Stock Exchange, told reporters in New York during Snow's visit today.

``You will see more wage growth,'' Thain said. ``The productivity numbers have been so good and the margins have been so good we can easily afford more wages.''

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