US payrolls surge in December in boost to economic outlook

US job growth surged in December and employment for the prior two months was revised sharply higher, suggesting that a recent manufacturing-led slowdown in economic growth would be temporary.

Non-farm payrolls increased by 292,000 last month, the Labor Department said on Friday. The unemployment rate held steady at a seven-and-a-half-year low of 5 per cent even as more people entered the labor force, a sign of confidence in the labor market.

October and November payrolls were revised to show 50,000 more jobs created than previously reported, adding to the report’s upbeat tone. The only wrinkle was a one cent drop in average hourly earnings, but that was most likely because of calendar effects which should reverse in the January report.

The solid employment data should soothe fears over the economy’s health and suggests the recent weakness in activity is mostly limited to the manufacturing and export-oriented sectors, which have been hit by a strong dollar and anemic global demand. Efforts by businesses to whittle down an inventory glut and spending cuts by energy companies have also inflicted pain.

In the wake of soft reports on manufacturing, construction spending and export growth, economists this week slashed their fourth-quarter growth estimates by as much a full percentage point to as low as a 0.4 per cent annual rate. The economy grew at a 2 per cent rate in the third quarter of last year.

The closely monitored jobs report could offer a brief respite to global stock markets after heavy selling this week sparked by signs of slowing growth in China.