2006 ends with strong job growth

WASHINGTON -- Employers added 167,000 jobs in December, a strong showing at year-end, and there is evidence that a slowdown in the housing and construction industries is not pulling the rest of the economy down.

New statistics from the Department of Labor provided positive news across the board and bolstered other recent statistics indicating the economy remains solid even as inflation is ebbing.

Unemployment held steady at 4.5 percent last month, down nearly half a percentage point from the start of 2006. The average unemployment rate for the year was 4.6 percent, compared to 5.1 percent in 2005 and the lowest average yearly rate in six years.

The average hourly wage, meanwhile, increased by 8 cents in December to $17.04, and is now up a brisk 4.2 percent for the year.

Overall the economy added 1.8 million jobs in 2006, with hiring that was spread across a number of sectors and which reinforced longstanding trends in the composition of the labor force.

The decline in manufacturing jobs continued: That sector shed another 71,000 spots over the year as plants moved overseas, others retooled to become more efficient, and automakers cut jobs in the face of international competition. Motor vehicle and parts firms lost 5,000 jobs in December alone, rounding out a year that saw widespread buyouts at General Motors Corp.

But the job performance of virtually every other economic sector was strong. Healthcare added 324,000 jobs, restaurants and bars around 304,000. There were smaller but still sizable gains among financial services and transportation companies.

Even construction, hit hard by the downturn in residential real estate and home building, managed to finish the year with no overall loss of jobs because of continued strength in the commercial office and other markets.

The monthly data, and the performance of the labor market as a whole during the past year, is likely to confirm current Federal Reserve policy of holding interest rates steady.

In recent months concern has seesawed between worry about inflation, and worry that the collapse of the housing market would bleed into the rest of the economy. As homeowners adjusted expectations about the value of their homes, it was thought, they'd turn away from the free use of home equity credit that has boosted retail spending in recent years -- this at a time when rising interest rates were taking more money from consumers with adjustable-rate loans.

The picture that has emerged in the past few weeks is more one of balance. Jobs lost in weak sectors are being offset by enough growth elsewhere to absorb new workers and keep unemployment from rising; wealth lost from the housing downturn is being offset by a sharp drop in energy costs and rising real wages.

Many analysts expect the economy to grow about 2.5 percent this year, a rate slower than its long-term average of around 3 percent, and below the more rapid pace of expansion during the past three years. Fed policy makers believe prices are still rising too quickly, and they hope a period of modestly subpar growth will cause inflation to fall further this year. Stock and bond prices fell yesterday after the strong employment data crushed financial market hopes that the Fed would cut interest rates early this year to counter economic weakness.

"The December employment report was rock-solid," Nigel Gault, US economist for the Global Insight consulting firm, wrote in his analysis of the numbers. "There was nothing to change the terms of the debate."