U.S. labor market stays hot

Published: Friday, January 6, 2006 at 6:01 a.m.
Last Modified: Thursday, January 5, 2006 at 10:46 p.m.
NEW YORK - The nation's service sector grew more rapidly in December and the number of workers filing new claims for jobless benefits fell to the lowest level in five years, signs the economy enters the new year on fairly strong footing.
The Institute for Supply Management said Thursday its index of nonmanufacturing activity increased to 59.8 last month from 58.5 in November. The new figure was above the 59 reading forecast by analysts.
Also Thursday, the government reported that first-time jobless claims fell by 35,000 last week to 291,000, the lowest level in more than five years and a sign that the national labor market continues to shake off the effects of Hurricanes Katrina, Rita and Wilma.
"We're looking at some positive expansion, solid growth in jobs and in general economic growth, and that's something we see continuing," said Jason Schenker, an economist at Wachovia Corp.
Economists cautioned against making too much of the one-week jobless claims figure, noting that it could be exaggerating improvements in the labor market during a holiday period when layoffs are difficult to measure. The week measured by the figure will not be included in the widely anticipated December payrolls figure scheduled for release this morning.
But Ian Shephardson, chief economist at High Frequency Economics in Valhalla, N.Y., said he expects the jobs picture to continue improving in coming weeks because retailers, who were relatively modest in their pre-holiday hiring, are likely to engage in fewer layoffs.
The two new reports provide more evidence that the hurricanes took only a limited and temporary toll on the national economy, even as they caused tremendous damage to the business climate in the Gulf states, Schenker said.
In other economic news Thursday, retailers reported holiday sales results that were respectable, if not spectacular. Analysts said the sales figures show that consumers are willing to spend, but only selectively.
The service sector's growth in December marked the 33rd straight month of its expansion.
A reading of 50 and above points to a growing service sector, while a figure below that signals contraction. The index, which has averaged 60.1 over the past year, fell as low as 53.3 in September when businesses were struggling to deal with sharply higher energy prices after Katrina.
But those concerns have diminished to some extent, even though still-high energy costs are continuing to cause increases in prices and product surcharges, said Ralph G. Kauffman, chairman of the ISM's survey committee.
"The overall indication in December is continued economic growth in the nonmanufacturing sector with a cautiously optimistic outlook as we enter 2006," he said in a written release.
The pickup in growth reflects faster growth in new orders received by service-sector companies, and in business activity, ISM said. A measure of employment in the sector also ticked up.
Of the 17 industries tracked by the report, 11 reported increased activity in December versus 12 in November. They include entertainment, business services, retail trade, finance and banking, insurance, communication, utilities, public administration, health services, other services and transportation.

Jobless claims dip at a glance

  • Also Thursday, the government reported that first-time jobless claims fell by 35,000 last week to 291,000, the lowest level in more than five years.
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