Hopes high for strong employment report to open year

Economists are expecting a strong employment report to open the year, with some anticipating that the economy added 200,000 jobs in December.

That would be the most the economy has added in a single month in nearly a year, and would suggest solid economic growth despite worries the last two months about the “fiscal cliff.”

ADVERTISEMENT
Hopes were bolstered by a survey of private businesses released Thursday by ADP that found firms hired 215,000 workers in December. The ADP survey also boosted its estimate for November by 30,000.

Mark Zandi, chief economist at Moody's Analytics, said he expected “a solid 200,000 gain in payrolls” in the December report.

Congress approved legislation this week that extends current tax rates for individuals with annual income under $400,000 and families with annual income under $450,000. It also put off, for two months, the spending cuts known as the sequester.

The combination of the tax hikes and spending cuts, known as the fiscal cliff, had sparked worries of a new recession if they were not prevented.

Zandi said the ADP figures “reflects the resilience of the job market in the face of the political brinksmanship over the fiscal cliff.”

But other Washington battles on the way are creating more uncertainty for business.

Congress will have to raise the debt ceiling, find a way to pay for another 10 months of the scheduled spending cuts and agree to legislation funding the government for much of the fiscal year.

“I don't expect an improvement in the job market until after Washington settles on what spending cuts and tax reform will be done, if any, and raises the Treasury debt ceiling,” Zandi said.

“The uncertainty created by the coming political battles will continue to limit any gains in the job market or economy,” he added. “However, the economy is raring to go, and if policymakers could simply get things reasonably together, it would be off and running."

The unemployment rate that now stands at 7.7 percent could rise slightly, especially if more people re-entered the labor force to look for work.

Another report on Thursday provided more positive data, showing the year ending with the lowest 12-month job-cut total since 1997, according to Challenger, Gray & Christmas.

In addition, weekly claims for first-time unemployment benefits have remained steady over the past month, providing more evidence of an improving economy.