US job growth cools slightly, recovery grinds on

Jan 05 2013, 03:02 IST
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U.S. service sector U.S. service sector
SummaryThe U.S. service sector activity expanding the most in 10 months.

U.S. employers kept their pace of hiring virtually steady in December, falling short of thelevels needed to bring down the country's lofty unemployment rate and pointing to lackluster economic growth in 2013.

Other data on Friday gave stronger signs of growth, with the U.S. service sector activity expanding the most in 10 months.

Payrolls outside the farming sector grew 155,000 last month, the Labor Department said. That was in line with analysts' expectations and slightly below the revised gain of 161,000reported for November.

The jobless rate was steady at 7.8 percent. The reportreinforces expectations of 2 percent economic growth this year, which is unlikely to quickly bring down the unemployment rate.

It is also unlikely to make the U.S. Federal Reserve rethinkits easy-money policies anytime soon despite growing unease by some policymakers over a bond-buying program.

"The U.S. economy is just muddling through," said Tom diGaloma, managing director at Navigate Advisors in Stamford, Connecticut.

The Labor Department raised its estimate for the unemployment rate in November by a tenth of a point to 7.8 percent, citing a slight change in the labor market's seasonal swings.

Most economists expect the U.S. economy will be held back by tax hikes this year as well as by weak spending by households and businesses, which are still trying to reduce their debt burdens.

Friday's data nonetheless gave signals of some momentum in the labor market's recovery from the 2007-09 recession.

Gains in employment were distributed broadly throughout the economy, from manufacturing and construction to health care.

Also, many economists had expected December's payroll gains to be padded by one-time factors like the recovery from a mammoth storm that hit the East Coast in late October.

The government had said last month the storm had no substantial impact on the November data, and many economists expected the government on Friday to recant by revising downward payroll gains in November. Instead, the government revised November payrolls upward by 15,000.

Average hourly earnings rose 0.3 percent last month, slightly more than analysts had expected, while the length of the average workweek edged higher.

"This shows the economy is chugging along, with payroll gains at about the average it has been over the past year," Tom Porcelli, an economist at RBC Capital Markets in New York.

Separately, the Institute for Supply Management said its services index rose to 56.1 last month, the highest since February.

POLICYMAKERS UNEASY

Some analysts said the pace of hiring remains too weak for the Fed to consider scaling

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