Zoetis CEO Juan Ramon Alaix, left center, applauds as his company's stock begins trading during its IPO, on the floor of the New York Stock Exchange, Friday, Feb. 1, 2013.
Ben Hider, Associated Press
Jobs numbers kindle optimism for recovery
- Article by: JIM PUZZANGHERA
- Los Angeles Times
- February 1, 2013 - 11:54 PM
WASHINGTON - Fears of a recession seemed to evaporate as the nation added 157,000 net jobs last month and other key economic data improved, boosting major stocks to their highest level in more than five years.
Economists and investors were heartened by the Labor Department's jobs report Friday, which suggested that growth accelerated at the end of last year. The new economic readings -- a mix of federal and private data -- contrasted with Wednesday's government report that the economy contracted at a 0.1 percent annual rate in the last three months of 2012.
The January jobs report, which also showed the unemployment rate ticked up to 7.9 percent, was about in line with analysts' expectations. But revised job-growth figures showed the labor market was much stronger at the end of 2012 than previously thought, indicating surprising momentum in 2013.
Revised government data showed that the economy added 335,000 more jobs than originally estimated during all of 2012, including an additional 150,000 in the last quarter of the year. That was on top of the previously reported fourth-quarter job growth of 603,000 and 2012 growth of 2.2 million. The new figures mean that, on average, the economy added 181,000 jobs each month last year, up from the earlier estimate of 153,000.
The higher revisions, in particular, encouraged traders on Wall Street, sending the Dow Jones industrial average over the 14,000-point mark for the first time since 2007. "The economy's the little engine that could," said JJ Kinahan, chief derivatives strategist for TD Ameritrade. "It's slowly climbing."
The small shortfall in the fourth quarter's gross domestic product -- the value of all goods and services produced nationwide -- marked the first contraction since the Great Recession ended in mid-2009 and raised worries that another downturn was ahead. Many economists quickly said the report appeared to be an anomaly driven by fears of the "fiscal cliff," and Friday's data gave more credence to that view.
"We had some pretty good job growth in the fourth quarter," said Stuart Hoffman, chief economist at PNC Financial Services. "You don't get that kind of job growth if the economy is legitimately flat on its behind."
Still, job growth has been modest compared with previous recoveries, and economists saw little in January's report to suggest that hiring would pick up soon. And the January figure also looked worse in comparison to the revised December figure. The unemployment rate rose from 7.8 percent in December.
"I think it's going to be a tough slog here," said Joshua Shapiro, chief U.S. economist for MFR Inc. "There are plenty of headwinds out there for the economy. The cost of hiring somebody is great, with benefit costs and everything, and unless companies really absolutely need someone, they're not going to hire."
Last month, the private sector added 166,000 jobs, but overall growth was pulled down by a net loss of 9,000 government jobs, the Labor Department said. Sectors that showed job gains included retail, construction and health care, while transportation and warehousing declined.
"It's a bit of an underwhelming report," said Peter McHenry, an assistant economics professor at the College of William and Mary. "We've still got just a very slow recovery -- certainly a recovery -- but not anything to be really excited about."
The construction industry added 28,000 jobs in January. Some economists had expected more, given the damage from superstorm Sandy last fall. But the increase was "validation the housing market continues to gain momentum," said Diane Swonk, chief economist at Mesirow Financial.
Since bottoming out in January 2011 after the housing collapse, the construction industry has added 296,000 jobs, the Labor Department said. One-third of that gain came in the past four months. "A quarter ago, you'd say the housing market had stabilized," Kinahan said. "Now you can say the housing market is starting to grow."
In another positive sign for the sector, the Commerce Department said Friday that construction spending increased 0.9 percent in December from the previous month, to an annual rate of $885 billion.
The manufacturing sector expanded for the second straight month, the Institute for Supply Management said. Jobs in the manufacturing sector have shown little change since the summer, the Labor Department said. And consumer confidence also improved slightly last month after Washington policymakers avoided most of the tax increases slated to kick in Jan. 1 as part of the fiscal cliff.
The closely watched consumer sentiment index from Thomson Reuters and the University of Michigan rose to 73.8 in January from 72.9 the previous month. One tax change that was not avoided -- the expiration of the two-year payroll tax cut -- held down consumer confidence, said Richard Curtin, the survey's chief economist. The higher payroll tax, which started showing up in paychecks in early January, was a drag on job growth, economists said.
More potential problems are looming as Congress must deal with automatic spending cuts set to hit March 1. And another battle over the nation's debt limit could be coming this summer after Congress approved a temporary increase last month.
Swonk said such "fiscal land mines" could derail the recovery. Although the nation does not appear headed toward recession again -- commonly defined as two straight quarters of contraction -- the economy remains fragile, Swonk said.
"The labor market is healing, but unevenly," she said.
The New York Times and Washington Post contributed to this report.
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