Mediocre job growth points to slow grind in US economy

US employers kept their pace of hiring steady in December, falling short of the levels needed to bring down a still lofty unemployment rate and pointing to lackluster economic growth in 2013.

Other data on Friday gave stronger signals on the health of the economy, with the U.S. service sector activity expanding the most in 10 months.

Payrolls, excluding farm jobs, grew by 155,000 last month, the Labour Department said. That was a touch more than analysts' expectations and only slightly below the revised gain of 161,000 reported for November.

The jobless rate was steady at 7.8 per cent. While firms kept on hiring despite the uncertainties raised by a budget stand-off in Washington, the report reinforced expectations of 2 per cent economic growth this year.

Such slow growth is unlikely to quickly bring down the unemployment rate and probably will not make the US Federal Reserve rethink its stimulus plan anytime soon despite growing unease among some policymakers over its bond-buying program.

The Labour Department raised its estimate for unemployment in November by a tenth of a point to 7.8 per cent.

Most economists expect the US economy will be held back this year by tax hikes as well as by weak spending by households and businesses, which are still trying to reduce big debts taken on before the 2007-09 recession.

Friday’s data nonetheless gave signals of some momentum in the labour market’s recovery. Gains in employment were distributed broadly throughout the economy, from manufacturing to health care. The government also said 14,000 more jobs were created in October and November than originally estimated.

Average hourly earnings rose 0.3 per cent last month, slightly more than analysts had expected, while the length of the average workweek edged higher.