Jackson Free Press

WASHINGTON (AP) — U.S. employers added 157,000 jobs in January, and hiring was much stronger at the end of 2012 than previously thought, providing reassurance that the job market held steady even as economic growth stalled.

The Labor Department report Friday showed a jump in hiring in the final two months of last year, just when the economy was sputtering and facing the threat of deep spending cuts and tax increases from the fiscal cliff. The department revised up the estimated job gains for November from 161,000 to 247,000 and for December from 155,000 to 196,000.

The mostly encouraging jobs report included one negative sign: The unemployment rate rose to 7.9 percent from 7.8 percent in December. The rate is calculated from a survey of households, and more people in that survey said they were unemployed.

The monthly job gains are derived from a separate survey of employers.

The hiring picture over the past two years also looked stronger after the department's annual revisions. The revisions showed that employers added an average of roughly 180,000 jobs a month in 2012 and 2011. That was up from previous estimates of about 150,000.

"The significantly stronger payroll gains tell us the economy has a lot more momentum than what we had thought," Joseph LaVorgna, chief U.S. economist at Deutsche Bank, said in a research note.

Stock futures rose sharply after the report was released at 8:30 a.m. Eastern time.

The report revealed a notable shift in the job market: More hiring by construction companies. They added 28,000 jobs in January and nearly 100,000 over the past four months. Those job gains are consistent with a rebound in home construction and a broader recovery in housing.

Retailers added 33,000 positions. Health care gained 23,000 jobs. Manufacturers reported a small increase of 4,000. Restaurants and hotels added 17,000.

Average hourly wages rose 4 cents to $23.78 and have risen an encouraging 2.1 percent in the past 12 months. That's slightly above the inflation rate, which was 1.7 percent.

Last month's hiring should cushion the impact of the higher Social Security taxes that most consumers are paying this year. And it would help the economy resume growing after it shrank at an annual rate of 0.1 percent in the October-December quarter.

Higher Social Security taxes are reducing take-home pay for most Americans. A person earning $50,000 a year will have about $1,000 less to spend in 2013. A household with two high-paid workers will have up to $4,500 less. Taxes rose after a 2 percent cut, in place for two years, expired Jan. 1.

Analysts expect the Social Security tax increase to shave about a half-point off economic growth in 2013, since consumers drive about 70 percent of economic activity.

The hit to consumers is coming at a precarious moment for the economy. It contracted in the fourth quarter for the first time in 3½ years. The decline was driven largely by a steep cut in defense spending and a drop in exports. Analysts generally think those factors will prove temporary and that the economy will resume growing.

Still, the contraction last quarter points to what are likely to be key challenges for the economy this year: the prospect of sharp government spending cuts and uncertainty over whether Congress will agree to raise the federal borrowing cap.

Most analysts predict that the economy will grow again in the January-March quarter, though likely at a lackluster annual rate of around 1 percent. They expect the economy to expand about 2 percent for the full year.

Two key drivers of growth improved last quarter: Consumer spending increased at a faster pace. And businesses invested more in equipment and software.

In addition, homebuilders are stepping up construction to meet rising demand. That could generate even more construction jobs.

And home prices are rising steadily. That tends to make Americans feel wealthier and more likely to spend. Housing could add as much as 1 percentage point to economic growth this year, some economists estimate.

Auto sales reached their highest level in five years in 2012 and are expected to keep growing this year. That's boosting production and hiring at U.S. automakers and their suppliers.