Weak Dec. Hiring Offers Little Buffer For 2013 Tax Hikes
Job growth in December and 2012 failed to accelerate, data showed Friday, providing the economy with no extra buffer as consumers feel new tax hikes this year.
Payrolls expanded by 155,000 last month, the Labor Department said, in line with 2012's monthly average of 153,000, which also matched 2011's pace.
"It's still modest after all this time," said Tom Porcelli, chief U.S. economist at RBC Capital Markets. "That's most striking about this report.
Unemployment was 7.8%, unchanged from November's upwardly revised rate. Unlike November, when 257,000 Americans left the workforce, December saw 192,000 join it. The labor participation rate held at 63.6%, still just above a 1981 low.
Stock indexes edged higher Friday.
A December service-sector activity index topped forecasts, and November factory orders were more positive for durable goods.
Wages rose 2.1% vs. a year earlier, a slight improvement from the creeping rate throughout 2012. But that merely keeps up with inflation and does little to offset the end of the Social Security payroll tax holiday. High earners are getting an even stiffer tax hike under the New Year's agreement that partly avoids the fiscal cliff.
Payrolls, which are already moving in "baby steps," should weaken in later months, as Americans see take-home pay drop and reduce spending, said Ellen Zentner, a senior U.S. economist at Nomura Securities.
Pending congressional action on the federal debt ceiling and automatic budget cuts delayed in the fiscal cliff deal will continue to weigh on investment.
"The fiscal tightening has begun," Zentner said. "Now the real painful and difficult negotiations begin.
Uncertainty over what lawmakers would do as the year-end cliff approached at least didn't devastate hiring. The private sector added 168,000 jobs, while governments shed 13,000. November's overall gain was adjusted higher by 15,000.
In December, manufacturers hired 25,000, and the previous month was revised up by 9,000. Construction payrolls swelled by 30,000, helped by the recovering housing market and rebuilding after Superstorm Sandy. Health care and social assistance added 55,000 jobs.
"At the end of the day, business has to respond to demand as it exists at the time," Porcelli said.
But lower-wage sectors continued to show robust increases as well. Bars and restaurants took on 38,000 more workers for a full-year increase of 285,600.
Retailers cut 11,300 positions, ending a five-month streak of accelerating growth capped by November's gain of 62,800. Courier and messenger firms downsized by 10,800. Professional services hiring slowed to 19,000 from 32,000 in the prior month.
But the service sector appears poised to improve. The Institute for Supply Management's activity index climbed to a 10-month high of 56.1 last month from 54.7 in November, meaning faster expansion. The jobs gauge surged 6 points, and orders picked up too.
