Only slightly emboldened by the compromise on tax increases reached in early January, American employers added 157,000 workers last month. The unemployment rate, meantime, climbed slightly to 7.9%, new Labor Department figures show.
The job growth is almost equal to the average monthly gains that the country has managed in recent years. It's slow, plodding progress that does little to dent the backlog of 12 million or so jobless workers. Little optimism for a faster expansion can be found elsewhere in the latest employment report. For example, the length of the average workweek, another a gauge of labor market health, was unchanged. Other downbeat measures have recently surfaced: the economy unexpectedly contracted to end 2012 and consumers are becoming increasingly unsettled.
That said, most observers are advising calm. "Coming on the heels of the unexpected dip in fourth-quarter GDP, January's employment report should help to soothe any lingering concerns that the economy is headed for a recession," says Paul Ashworth, chief U.S. economist at Capital Economics.
Retail, construction and health care contributed most to January's payroll increases. The government again cut workers last month, extending what's been trend for much of the past four years.
Still, the Labor Department boosted estimates for November (by 86,000 to 247,000) and December (41,000 to 196,000), a sign that earlier snapshots were too gloomy.
Economists had thought employers would add 165,000 jobs in January as joblessness decreased to 7.7%.
U.S. stocks climbed higher after the employment report. The Dow Jones industrial average rose 0.7% to 13,958.34, placing it nearly within a 100 points of its all-time high. The Nasdaq composite added 0.7% to 3,162.28. The S&P 500 increased 0.5% to 1,505.83.
The jobs data will likely reinforce the Federal Reserve's stance that the economy is in a tepid recovery and requires stimulative policies for at least the next two years. A recent meeting of the Fed's policy committee showed nearly all central bank officials believe it will need to continue pumping billions of dollars into the financial system—and aren't concerned by mild readings on inflation.
All this accommodation for the market means investor confidence is kept high. Markets may be taking some comfort over the combination of employment gains and a rise in the unemployment rate, given the Fed’s now quantitative target of 6.5% for onset of higher policy rates," says Citi economist Steven Weiting. "Even though strong jobs data would hasten the end of quantitative easing well before."
While lawmakers have reached a decision on tax increases—agreeing to keep the Bush Tax Cuts for most Americans—battles over the debt limit and spending cuts loom in the next few months. These debates threaten to restrain the economy as uncertainty clouds business' ability to plan.
Economists expect the country will continue apace for the rest of 2013. Predictions call for about 170,000 new jobs per month. The most bullish market participation see unemployment just dropping below 7% within the year.
Some concerns exist that 2013 will follow the pattern set in the last two years: strong growth in the beginning fades in the summer months. "The job market was healthier than we thought back in 2011 before losing steam last year," says FTN Financial economist Chris Low. "And the picture painted by the last three months is of an economy losing steam again after heady job growth in September, October and November."
In corporate news, Mattel shares fell 2% to $36.81 after earnings fell 17% and missed analysts' expectations.
Merck fell 3.1% to $41.89 following the pharmaceutical giant's quarterly report that strong sales of a diabetes drug and Gardasil vaccine boosted profit.
Dell rose 4.5% to $13.83 on speculation that a buyout offer between $13 to $15 a share could come as soon as Monday.
Technology stocks added to the Nasdaq's rally. Apple increased 0.5% to $457.75. Research in Motion gained 3.2% to $13.39.
Reach Abram Brown at abrown@forbes.com.
