US unemployment rate holds steady in December at 7.8%

The BBC's Michelle Fleury reports from a US store with a queue of applicants

The US economy added a further 155,000 jobs in December, while the unemployment rate held steady at 7.8%, official figures show.

The jobs came mainly in the healthcare, manufacturing, construction and food services sectors, the Labor Department said.

The public sector shed 13,000 jobs, mainly at the local level, but this was more than offset by the private sector.

Separate figures suggested a sharp rise in activity in the US service sector.

The Institute of Supply Management said its service index rose to 56.1 in December, from 54.7 the previous month. Any reading above 50 suggests expansion.

The December reading was the highest since February and was stronger than analysts had expected.

Deadline postponed

The total number of unemployed in the US in December was largely unchanged at 12.2 million.

The unemployment rate for November was revised up from 7.7% to 7.8%, the department added.

These are the first figures since a short-term deal to stave off the US "fiscal cliff" was reached earlier this week.

If a deal had not been agreed, spending cuts and tax rises worth $600bn (£370bn) would have kicked in. These could have thrown the US back into recession and sent the unemployment rate shooting upwards.

Still, the deal has only postponed by two months negotiations over spending cuts and the government debt ceiling - a legal cap on its total borrowing set by Congress. If this cap is not raised, the US is set to run out of money by February.

Bottoming out?

The December new jobs figure was only slightly above the average 153,000 jobs created per month in both 2012 and 2011.

The US economy needs to add about 90,000 jobs a month to keep up with population growth.

"While a 150,000-170,000 per month trend in payrolls is far from booming, it is strong enough over time to keep the unemployment rate moving down," said Jim O'Sullivan at High Frequency Economics.

Analysts expect many of the 30,000 new construction jobs - the sector's best performance in 15 months - to reflect rebuilding in the north-east of the US following the damage inflicted by Storm Sandy in October.

However, it may also reflect the bottoming-out of prices and activity in the US housing market following the collapse of last decade's property bubble.

New home construction has typically played a leading role in the recovery following previous US recessions.

Last month, the US Federal Reserve said it planned to keep interest rates at close to zero at least until the US unemployment rate falls below 6.5%.

Interest rates in the US have been close to zero since December 2008, and the Fed again kept them at below 0.25% last month. It also continues to buy $85bn (£53bn) a month of government bonds and mortgage-backed securities to try to boost the economy.

The Fed said in December: "The committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labour market conditions."

Meanwhile, in Canada, the jobless rate fell to 7.1% in December, its lowest level for four years, according to official figures.

"Canadian employment not only defied expectations in December, it also appears to be defying gravity," said Doug Porter, the Bank of Montreal's deputy chief economist.

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