Economy creates 167,000 jobs
Published: Saturday, January 6, 2007 at 6:01 a.m.
Last Modified: Saturday, January 6, 2007 at 12:00 a.m.
WASHINGTON — Ending 2006 on a positive note, employers boosted hiring and fattened workers' paychecks in December, capping a year in which the country's unemployment rate averaged a six-year low of 4.6 percent.
The latest snapshot of the nation's employment climate, released Friday by the Labor Department, suggested that most businesses held up pretty well as the real-estate bust caused the economy to lose momentum last year.
Employers added 167,000 new jobs to their payrolls in December, and the unemployment rate held steady at 4.5 percent.
That showing was "rock solid," said Nigel Gault, economist at Global Insight.
But on Wall Street the strong report sent stocks tumbling. It dashed investors' hopes that the Federal Reserve would soon slice interest rates to bolster the economy. The Dow Jones industrial average dropped 82.68 points to 12,398.01 — the biggest one-day decline since Nov. 27. The Dow had sunk by more than 115 points in earlier trading.
The tally of jobs exceeded forecasts and was the most since September. Employment gains also turned out to have been stronger in both October and November as 29,000 more jobs were created in those two months combined than the government had estimated.
Sharing in last month's gains were architectural and engineering outfits, hospitals and doctors' offices, banks, computer design firms, bars and restaurants, hotels and motels, and schools. The increases swamped losses in construction and manufacturing that reflected the troubled housing and automotive sectors. Retailers also cut workers.
"The economy seems to be weathering the storm clouds in the auto and housing industries. Employers are putting out the hiring signs — though they are not being overly aggressive — and workers are earning more money," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group.
For all of 2006, the economy added 1.8 million jobs, or an average of 153,000 a month, which was down from an average of 165,000 a month in 2005. The job creation was sufficient to help pull down the unemployment rate to 4.6 percent last year from an average of 5.1 percent in 2005.
With the economy losing momentum, many economists predict the jobless rate will climb this year and average around 4.9 percent.
Paychecks grew briskly last month.
Workers, many of whom had seen their pay eaten by inflation, saw their average hourly earnings jump to $17.04 in December, a 0.5 percent rise from the prior month.
Over the past 12 months, wages grew by a strong 4.2 percent, a gain last exceeded in November 2000. Wages are now growing faster than consumer prices, which should leave people with more money to spend. That's good for workers and for the economy because consumer spending is a big force driving overall economic activity.
Commerce Secretary Carlos Gutierrez, in an interview, said the pickup in wages was especially welcomed. "This was something that we were expecting, and, frankly, we were hoping for," he said. "It is very encouraging to see." Democrats have rapped the Bush administration about sluggish wage growth.
However, a rapid and sustained advance — if not blunted by other economic forces — can stoke concerns about inflation.
Federal Reserve Chairman Ben Bernanke says the central bank will be on close watch for any signs that wage growth might be spurring an unwanted pickup in inflation.
The Federal Reserve, which has boosted interest rates 17 times since June 2004 to fend off inflation, has been on the sidelines since August. The strong wage and job-growth figures dashed investors' hopes that the Fed might soon lower rates.
A top priority for Democrats, who took control of Congress on Thursday, is boosting the federal minimum wage from $5.15 to $7.25 an hour. President Bush has said he supports such a move as long as it is paired with business-friendly provisions, which would soften the sting to employers who would have to pay more to workers.
The job hunt got shorter in December.
The average time that the 6.8 million unemployed people spent in their job searches was 15.9 weeks, the shortest in more than four years.
The unemployment rate for blacks dropped to 8.4 percent in December, the best showing in more than five years. The rate for Hispanics dipped to 4.9 percent, a two-month low.
The health-care sector, a broad category including hospitals and doctors' offices, added 31,000 new jobs in December and 324,000 for all of 2006. Employment in professional and business services, including architects, engineers and computer designers, rose 50,000 last month and was up by 420,000 over the year. The financial sector, including banks, insurance companies and real-estate firms, added 9,000 jobs last month and 153,000 over the year.
Factories, meanwhile, shed 12,000 jobs last month and lost 72,000 over the year. Construction companies cut 3,000 jobs last month but saw employment for the year grow by 39,000. Retailers shed 9,200 jobs in December and nearly 58,000 for the year.
Economic growth slowed to a pace of 2 percent in the late summer — the most recent period available — and is expected to remain sluggish for a while as the economy works its way through fallout from the housing slump and the lingering impact of two years of rising interest rates.
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