Employers added workers in December at about the same pace as the prior month, and the unemployment rate matched a four-year low, showing sustained gains in the U.S. labor market even as lawmakers were struggling to reach a budget deal.

Payrolls rose by 155,000 workers last month following a revised 161,000 advance in November that was more than initially estimated, Labor Department figures showed today in Washington. The median estimate of 82 economists surveyed by Bloomberg called for an increase of 152,000. The unemployment rate held at 7.8 percent, matching the lowest since December 2008.

Improved hiring, hours worked and wages are helping underpin spending at retailers from Macy's Inc. to Gap Inc., where December sales beat analysts' estimates. Even bigger advances in employment may depend on lawmakers reaching an agreement on a deficit-reduction plan after Congress this week averted income-tax increases on about 99 percent of households.

“The labor market continues to recover,” Brian Jones, a senior U.S. economist at Societe Generale in New York, said before the report. “The pace of hiring is respectable, and the unemployment rate will gradually keep coming down. With the fiscal cliff having been averted, this should be good for job growth. The labor market will continue to make progress this year.”

Bloomberg survey estimates ranged from increases of 80,000 to 305,000. Revisions to prior reports added a total of 14,000 jobs to payrolls in the previous two months.

The economy created 1.84 million jobs for a second straight year.

Annual revisions to the household survey showed the unemployment rate averaged 8.1 percent in 2012, the lowest in four years.

Average hourly earnings climbed 2.1 percent from December 2011, to $23.73, the biggest gain in a year, today's report showed. The average work week for all workers climbed to six minutes to 34.5 hours.

Private payrolls, which exclude government agencies, rose 168,000 in December after a revised gain of 171,000. They were projected to rise by 155,000, the survey showed.

Factory payrolls increased by 25,000, the most since March and compared with the Bloomberg survey forecast of a 4,000 increase.

Employment at private service-providers increased 109,000. Retailers decreased staff by 11,300. Construction companies added 30,000 workers, the most since September 2011. The figures may have received a boost from rebuilding efforts following superstorm Sandy, which left about 8 million homes and businesses without power for days after making landfall on Oct. 29.

Government Jobs

Government payrolls decreased by 13,000 in December, the third straight month of declines.

Progress in the labor market is driving Americans' confidence and spending. Macy's, the second-biggest U.S. department-store company, reported a 4.1 percent rise in December sales at stores open at least a year, while Gap, the largest U.S. specialty-apparel retailer, had a 5 percent increase.

Congress this week reached a compromise that averted the so-called fiscal cliff of $600 billion in tax increases and government spending cuts. At the same time, a battle still looms over raising the $16.4 trillion debt limit, and on automatic spending reductions, known as sequestration, that were delayed for two months.

Some chief executive officers including David Cote of Honeywell International Inc. are urging lawmakers to move quickly.

“A plan that will truly help to expand the U.S. economy over the long term” is needed, Cote, who leads the maker of flight controls and thermostats, said in a Jan. 2 e-mailed statement.

“We're in the same old fight with uncertainty still in the market,” said Brad Thompson, CEO of employee-owned Columbia Forest Products Inc., the largest North American maker of decorative hardwood plywood.

The path to faster hiring in late 2012 was made difficult by concern over the possibility of fiscal tightening. Cintas Corp., a Cincinnati-based provider of uniforms and safety products, noted a “wait-and-see attitude” among clients, Chief Financial Officer William Gale said on a Dec. 20 earnings call with analysts.

Motor Homes

In contrast, Winnebago Industries Inc., a Forest City, Iowa-based maker of motor homes, was expanding to increase production. The company hired about 160 people, or 12 percent more hourly employees, in the quarter ended Dec. 1.

“We're still supplementing by working overtime in many, many areas of the company,” Sarah Nielsen, chief financial officer, said on a Dec. 20 earnings conference call. “That's been a factor for the last six months plus. And we're going to have to continue to hire to support attrition.”

The goal of faster progress in the economy and labor market is one reason Federal Reserve policy makers, four years after cutting the main interest rate to around zero, have expanded their third round of so-called quantitative easing. The central bank on Dec. 12 said it would hold borrowing costs low “at least as long” as the unemployment rate remains above 6.5 percent and inflation projections are for no more than 2.5 percent.

Bloomberg News

Instant Insights /

December Payrolls Up 155,000

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