Economy Watch: December Job Creation Middling; Fed’s Thinking on QE3 May Be Shifting; Initial Unemployment Claims Up

By Dees Stribling, Contributing Editor

The Bureau of Labor Statistics said on Friday that the U.S. economy created 155,000 jobs in December, with healthcare, food services, construction, and manufacturing all adding positions. The rate of job creation during all of 2012 averaged about 153,000 per month, so the year ended with neither a bang nor a whimper. The unemployment rate didn’t budge for the month, remaining at 7.8 percent.

On Thursday, ahead of the official report, Automated Data Processing issued its monthly report (in collaboration with Moody’s Analytics), which often doesn’t jibe with government numbers. In this case, ADP asserted that the private sector created 215,000 jobs in December. The November 2012 report, which reported job gains of 118,000, was revised upward to 148,000 jobs.

“The job market held firm in December despite the intensifying fiscal cliff negotiations in Washington,” Mark Zandi, chief economist of Moody’s Analytics, said in a statement. “Businesses even became somewhat more aggressive in their hiring at year end. The job market ended 2012 on a more solid footing.”

Fed Thinking on QE3 May be Shifting

The Federal Reserve Open Market Committee released the minutes from its Dec. 11-12 meeting on Thursday, which said that “a few members expressed the view that ongoing asset purchases [the QE3 stimulus, that is] would likely be warranted until about the end of 2013, while a few others … did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet.” In other words, at least some members of the committee are thinking in terms of a QE3 sunset.

The committee also noted a change in thinking about when the historically low interest rates that the central bank has maintained in recent years. Previously, the rates were to be low for period of time, albeit vaguely specified. Now the Fed is thinking in terms of economic indicators.

“All but one member agreed to replace the date-based guidance with economic thresholds indicating that the exceptionally low range for the federal funds rate would remain appropriate at least as long as the unemployment rate remains above 6½ percent,” the statement explained. Also, it said that inflation between one and two years ahead needed to be no more than a half percentage point above the committee’s longer-run goal (thought to be 2 percent), and longer-term inflation expectations also needed to be mild.

Initial Unemployment Claims Up

On Thursday, the U.S. Department of Labor reported that initial unemployment claims saw an uptick from 10,000 to 372,000 for the week ending Dec. 29. The four-week moving average was 360,000, an increase of 250.

Wall Street wasn’t as exuberant on Thursday as the day after the fiscal cliff deal, and even had a down day, but it didn’t lose that much. The Dow Jones Industrial Average was down 21.19 points, or 0.16 percent, while the S&P 500 was off 0.21 percent and the Nasdaq declined 0.38 percent.