Employment Ends Year On Strong Note

Employers stepped up hiring last month, boosting payrolls by a brisk 167,000 and keeping the unemployment rate steady at a still historically low 4.5 percent. Workers' wages grew briskly.

The latest snapshot of the nation's employment climate, released Friday by the Labor Department, showed that the jobs market ended 2006 on a strong note and provided fresh evidence that the troubled housing and automotive sectors aren't dragging down employment across the country.

"This is a very low unemployment rate by historical standards. There are jobs out there. There aren't a lot of people looking for them," David Wyss, chief economist at Standard & Poor's, told CBS Radio News.

Analysts had predicted that 132,000 new jobs would be created and that the unemployment rate had held steady at 4.5 percent, reports CBS News correspondent Alexis Christoforous. The job-creation number was even better than expected, and the rate prediction was dead on.

"The numbers were very good, unexpectedly good, actually, and it just continues to show how resilient the U.S. economy is," Touro College finance professor Peter Sperling told CBS Radio News.

For all of 2006, the nation's unemployment rate dropped to a six-year low of 4.6 percent. In 2005, the unemployment rate averaged 5.1 percent.

With the economy losing momentum, though, many economists predict the jobless rate will climb this year and average around 4.9 percent.

Employers showed not only a greater appetite to hire in December but also more willingness to boost compensation to workers.

"It's partly a reflection of the strength in the labor market. As the labor market remains tight, employers are willing to pay more," said Sperling.

Workers, many of whom had seen their paychecks eaten by inflation, saw wages grow robustly last month. Average hourly earnings jumped to $17.04, a sizable 0.5 percent rise from the prior month. Analysts were forecasting a more modest, 0.3 percent increase.

Over the last 12 months, wages grew by a strong 4.2 percent. That matched the annual gain registered in November and was exceeded only by a 4.3 percent annual increase in November 2000.

Growth in wages should support consumer spending — a force that helps drive the economy. But a rapid and sustained advance — if not blunted by other economic forces — can stoke concerns about inflation.

"It's good for earnings from a standpoint that we're getting paid more, but it's bad from a standpoint that the Fed is going to be worried more and more about inflation," said Wyss. "It certainly eliminates any chance of an interest rate cut in the near future."

Federal Reserve Chairman Ben Bernanke says the central bank will be on close watch for any signs that wage growth might be spurring an unwanted pickup in inflation.

The Federal Reserve, which has boosted rates 17 times since June 2004 to fend off inflation, has been on the sidelines since August. Analysts believe the Fed will keep its finger on the interest-rate pause button when it meets next on Jan. 30-31.

"Hiring increases have been pretty consistent across the board, except in manufacturing and construction," said Sperling. "The auto industry continues to be weak, but in most of the rest of the economy — the service sector, retail, financial services — employment is pretty good."

The latest employment snapshot comes as the new Democratic-controlled Congress, which convened Thursday, will now play a lead role in shaping policies for workers and businesses.

A top priority for Democrats is boosting the federal minimum wage from $5.15 an hour to $7.25 an hour. President Bush said he supports such a move as long as it is paired with business-friendly provisions, which would soften the sting to employers who would have to dole out more in labor costs.

The job hunt got shorter in December.

The average time that the 6.8 million unemployed people spent in their job searches was 15.9 weeks, down from 16.3 weeks in November.

The strong showing on jobs comes even as the economy lost steam throughout last year.

Economic growth slowed to a pace of 2 percent in the late summer — the most recent period available — and is expected to remain sluggish for a while as the economy works its way through fallout from the housing slump and the lingering impact of two years of rising interest rates.

Even with the expectations for slow growth ahead, most analysts don't believe the economy will slide into recession, but they do predict that the unemployment rate will climb.