WRAPUP 4-US private sector job gains offer hope for labor market

Thu Jan 3, 2013 4:17pm EST

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* Private employers add 215,000 jobs in December
    * Weekly jobless claims rise 10,000 last week
    * Four-week average of claims steady at 360,000
    * Data point to underlying momentum in the economy

    By Lucia Mutikani
    WASHINGTON, Jan 3 (Reuters) - U.S. private-sector employers
shrugged off a looming budget crisis and stepped up hiring in
December, offering further evidence of underlying strength in
the economy as 2012 ended. 
    While other data on Thursday showed an increase in the
number of Americans filing new claims for unemployment benefits,
the trend remained consistent with steady job growth.
    "The underlying economy has momentum, and the employment
data confirms that. The hope and prayer of the market is that
our political leaders don't screw it up," said John Brady,
managing director at R.J. O'Brien & Associates in Chicago.
    Although Congress this week approved a deal to avoid the
so-called fiscal cliff, a combination of sharp government
spending cuts and higher taxes that would have sucked about $600
billion from the economy, the budget problems are far from
resolved.
    The ADP National Employment Report showed the private sector
added 215,000 jobs last month after increasing payrolls by 
148,000 in November. The report is jointly developed with
Moody's Analytics. 
    The job gains came even as companies worried the economy
might fall off the fiscal cliff. 
    However, the ADP data tends to overstate job gains in
December because of a year-end accounting quirk.
    "While we are encouraged by the better tone in the ADP
employment report, we are cautious about reading too much into
it, particularly given its tendency to exaggerate the
performance of the labor market in December," said Millan
Mulraine, a senior economist at TD Securities in New York.
    Still, the report added to other data ranging from consumer
spending to manufacturing that have suggested the economy was in
a much better shape than previously thought. 
    It was released ahead of the government's more comprehensive
employment report on Friday, which is expected to show employers
added 150,000 jobs to their payrolls in December, according to a
Reuters survey of economists, up from 146,000 in November.
    
 
    
    STEADY JOB GAINS
    A separate report from the Labor Department showed initial
claims for state unemployment benefits increased 10,000 to a
seasonally adjusted 372,000 last week. However, claims data for
nine states, including California and Virginia, was estimated
because of the Christmas and New Year holidays.  
    The four-week moving average for new claims, a better
measure of job market trends, was little changed at 360,000, a
sign labor conditions continue to improve at a steady pace.
    "The claims data are not always reliable labor market
indicators around the holiday season because of issues
seasonally adjusting the data, but it is still a somewhat
encouraging sign to see the trend in the data remain relatively
low," said Daniel Silver, an economist at JPMorgan in New York.
    Job gains in the first 11 months of last year averaged about
151,000 per month, not enough to significantly lower
unemployment. The jobless rate dropped by 0.2 percentage point
to 7.7 percent in November and is expected to have held at that
level last month.
    Labor market concerns prompted the Federal Reserve to
aggressively ease monetary policy, but consensus is diminishing.
    Minutes of the U.S. central bank's Dec. 11-12 meeting
released on Thursday showed some policymakers thought it would
be prudent to slow or stop asset purchases well before the end
of this year because of concerns about financial stability.
    Stocks on Wall Street ended lower on the prospect of the Fed
adopting a less accommodative stance. Prices for U.S. government
debt fell, with the yield on the longer-dated 30-year bond
touching its highest level since May.
    The U.S. dollar rose against a basket of currencies.    
    The improving labor market tone was also captured by a third
report showing planned layoffs at U.S. firms fell in December
for the first time in four months, while the overall job-cut
total in 2012 was the lowest since 1997.
    "The key to job creation is the pace at which companies are
willing to hire new workers since it appears they are already
retaining existing employees at a high rate," said John Ryding,
chief economist at RDQ Economics in New York.
    Better job security is helping to support domestic demand.
Auto sales rose 9.0 percent last month to a 1.36 million-unit
annual rate last month. 
    Several major retailers reported better-than-expected sales
in December. Sales at stores open at least a year rose 4.5
percent, beating analysts' estimates for 3.3 percent growth.
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