The economy added 155,000 jobs in December while the unemployment rate ticked up to 7.8 percent.
The report from the Bureau of Labor Statistics suggests the economy is continuing slow but steady growth despite policy uncertainties in Washington.
The unemployment rate rose from 7.7 percent to 7.8 percent, the first jump in the rate since before the presidential election, which was dominated by concerns about the economy and jobs. A year ago the unemployment rate was 8.3 percent.
Congress this week approved a “fiscal cliff” deal that prevented tax hikes on most households, but fights over the debt limit and government spending are expected to dominate Washington and rattle the private sector for the next several months.
The deal also included a one-year extension of federal unemployment benefits, which kept 2.1 million from losing their weekly checks. December's report found the total number of unemployed people rose to 12.2 million, an increase of 164,000.
“To keep our recovery going, we need to avoid another knock-down, drag-out fight over whether to default, or to pay our nation's existing bills," said Sen. Majority Leader Harry Reid (D-Nev.).
"If our recovery is to take off, we must forgo this kind of reckless, partisan brinkmanship, and work together to find solutions that work for the middle class.”
House Majority Leader Eric Cantor (R-Va.) called the report "disappointing."
"We are barely getting by, and that is not good enough for our sons and daughters, friends and neighbors who are driving from job interview to job interview," Cantor said in a statement. "The unemployment number also does not reflect the millions of people who have given up hope of finding a job altogether."
Alan Krueger, chairman of the White House's Council of Economic Advisers, said the figures show the nation is "steadily digging our way out of a deep hole from the financial crisis."
Twice as many private sector jobs have been added compared with the previous recovery, Krueger said, but the economy shed so many jobs it is taking longer to get back to a lower level of unemployment.
"It's important we build on this progress, we'd like to see faster job growth," he said on MSNBC on Friday.
Construction added 30,000 jobs — the highest number in more than a year — amid positive signs for the housing sector. Hurricane Sandy recovery efforts also bolstered construction jobs.
Manufacturing added 25,000 jobs for the month, a positive sign for a sector that contracted in four of the past seven months but finished the year on a positive note.
Factory employment increased by 180,000 last year, with most of the growth during the first three months of the year.
The report highlighted ongoing problems in the public sector, which lost 13,000 jobs, most of them teaching positions.
For the year, the private sector added more than 1.8 million jobs while state and local governments shed positions.
In December, the number of long-term unemployed was 4.8 million and accounted for 39.1 percent of the unemployed.
A separate report from Gallup suggested consumer spending has strengthened.
Consumers spent an average of $83 per day in stores, online and in restaurants in December, which is not only the most since December 2008, but the first time the figure has eclipsed $80 since the recession, Gallup said in a Friday report.
Many households could see their spending pinched, however, by the fiscal cliff deal. While the deal only allowed tax rates to rise on annual income of $400,000 for individuals and $450,000 for families, it also allows a two-percentage-point cut in the payroll tax to expire. Workers as a result will see a drop in their paychecks in January.
This story was posted at 8:43 a.m. and was last updated at 10:06 a.m.