Employers added just 108,000 jobs in December — about half what forecasters expected — but November employment was much stronger than originally reported and the jobless rate dropped back below 5 percent, the Labor Department reported Friday.
While the monthly report was a bit disappointing, the result was strong enough to allow President Bush to boast that the economy is heading into the new year "with a full head of steam.”
The 108,000 gain in payrolls last month followed a big pickup of 305,000 jobs added in November. That was the strongest month since April 2004 and much better than the 215,000 originally reported.
The unemployment rate, measured through a separate survey, dipped in December to 4.9 percent from 5 percent in November, the Labor Department said.
For all of 2005, the economy added 2 million jobs — a solid amount and about the same as the year before. The unemployment rate averaged 5.1 percent last year, an improvement from the 5.5 percent average registered in 2004.
“We have a sturdy job market,” said Mark Zandi, chief economist at Moody’s Economy.com. He expects another 2 million jobs to be created this year and that average unemployment rate for all of 2006 will move lower.
On Wall Street, stocks moved higher. The Dow Jones industrial average was up about 42 points, adding to a solid gain for the new year's opening week.
Forecasters had expected the economy to add about 200,000 jobs in December, but job losses in construction, retail and transportation blunted job gains in manufacturing, professional and business services, education and health services and government.
Economists said the slower growth in payrolls in December was likely to be temporary and didn’t suggest a serious backslide in the labor market.
“There are a lot of crosscurrents out there, ... but overall the report suggests the job market is still doing pretty well,” said Carl Tannenbaum, chief economist at LaSalle Bank.
While the month-to-month job figures can be erratic, economists said the picture painted over the past year is a good one.
In a campaign-style swing through Chicago, Bush rattled off a string of recent government reports suggesting a growing U.S. economy and urged Congress to extend his administration’s tax cuts that are due to expire.
“In 2005, the American economy turned in a performance that is the envy of the industrialized world,” Bush said.
He said that to oppose extending the tax cuts was the same as “saying we’re gong to raise taxes on you.”
Average hourly earnings climbed to $16.34 in December, up 0.3 percent from November, a bit larger than the 0.2 percent gain economists were forecasting.
While wage growth is good for workers, a rapid pickup — if sustained — would be worrisome to investors and economists who worry about inflation.
To keep inflation in check, the Federal Reserve is expected to boost short-term rates at its next meeting on Jan. 31, which will mark the last session for Chairman Alan Greenspan, who will retire that day after 18-plus years at the helm.
Another rate increase could come at the following meeting on March 28— the first one to be presided over by incoming Fed chief Ben Bernanke. Either way, many economists believe the Fed’s nearly two year credit-tightening campaign will be winding down this year.
The employment report also showed that the average time the unemployed spent searching for work in December was 17.3 weeks, an improvement from the 17.6 weeks in November.
October’s payrolls turned out to be a bit weaker — showing an increase of 25,000, versus 44,000 previously reported, according to revised figures released Friday. Still, given that was a month where the lingering effects of the devastating Gulf Coast hurricanes were still being felt, the lackluster performance could be explained.