Wall Street has shrugged off slowing growth in US jobs, extending a surge in the stock market as the world’s largest economy comes closer to reaching full employment.
The Dow Jones Industrial Average was up about 0.2% in New York on Thursday morning, adding more than 50 points to reach 25,123, despite the weaker readings for job creation last month. Figures from the US labor department showed 148,000 new positions were created in December, below the forecasts of economists, as the retail sector shed 20,000 jobs over the holiday season.
The headline numbers suggest that the jobs market remains strong. The labor department announced that the unemployment rate held steady at 4.1% in December, close to a 17-year low. Economists expect jobs growth to slow this year as the US labour market comes closer to full employment.
The US economy has now added more than 2m jobs annually for seven straight years, a run last seen in the 1990s. But the pace of hiring has slowed, the recovery remains uneven, and wages continue to lag behind growth.
Analysts had expected the US to add 180,000 jobs over the month. The labor department also cut its hiring figures for October and November, with a net downward revision of 9,000 jobs.
The troubled retail sector lost 20,000 jobs over the month as the shift to online shopping took its toll even over the holiday season. The economy added new jobs in healthcare (up 31,000), construction (up 30,000) and manufacturing (up 25,000).
Wages continued their sluggish recovery, rising 2.5% in December from a year earlier, despite expectations that lower unemployment would add to the bargaining power of workers to demand higher wages.
Policymakers at the Federal Reserve will have been looking for signs of wage growth as they prepare to nudge interest rates higher. Stronger growth in pay typically leads to inflation – as companies raise prices offered to consumers to compensate for their higher wage bills – which can be kept in check using higher interest rates.
Elise Gould, senior economist at the Economic Policy Institute, noted that December marked the 10th anniversary of the start of the last recession. “While by some measures the economy has recovered, the topline numbers mask important differences in the experiences of working people,” she said. “Employers should be lining up for workers – instead of workers competing for jobs.”
On Wednesday ADP, the US’s largest payroll processor, said private employers had added 250,000 jobs over December. Anticipation of a more positive government jobs report had already driven stock markets to record highs.
Mark Zandi, chief economist of Moody’s Analytics, which helps compile the report, said: “The job market ended the year strongly. Robust Christmas sales prompted retailers and delivery services to add to their payrolls. The tight labor market will get even tighter, raising the specter that it will overheat.”
The news from ADP sent stock markets soaring with the Dow Jones Industrial Average closing above 25,000 for the first time. The Dow rose by more than 25% last year, driven up by low interest rates, expectation of tax cuts and a rebounding global economy.
guardian.co.uk © Guardian News and Media Limited 2010