Jobs growth gives US economy boost as fiscal cliff fears recede

Sat, Jan 5, 2013, 00:00

The US economy shrugged off concerns about the fiscal cliff as it started 2013 with 155,000 new jobs and rising confidence in the services sector.

Jobs growth was almost exactly in line with forecasts, while the unemployment rate edged up from 7.7 to 7.8 per cent, although slight revisions to the previous month's data meant the figure was unchanged.

The figures suggest no stall in the economy at the end of 2012, widely feared because of uncertainty about tax rises and spending cuts, but it is still locked into a pattern of sluggish growth.

Economists expect the world's largest economy to continue its recovery in 2013, but there is little prospect for rapid growth because of tax rises and spending cuts in the recent fiscal deal, as well as uncertainty caused by an imminent fight over the federal debt ceiling.

Jobs growth is still too slow to bring unemployment down rapidly, highlighting the need to extend unemployment benefits as part of the fiscal cliff deal and the US Federal Reserve's continued effort to stimulate the economy.

Investors judged the minutes of the last Fed policy meeting meant it might end its programme of bond-buying earlier than they previously expected. That sparked a gold sell-off, which eased after the jobs data. A number of details in the jobs report pointed to health in the economy.

New jobs

Job creation was spread across industries, with healthcare adding 45,000 posts, restaurants creating 38,000, construction 30,000 and manufacturing 25,000. The rise in construction jobs - crucial for overall employment - suggests that signs of a strong recovery in the housing market are creating employment.

The pick-up in manufacturing jobs is evidence a plunge in business confidence late in 2012 has not frozen hiring.

There was a solid rise in weekly earnings by about $4 to $673.30. There were continued job losses in the government sector, though, which shed 13,000 jobs, as austerity bit into state and local governments. - Copyright The Financial Times Limited 2013