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U.S. economy adds jobs, but unemployment rate rises

Associated Press
February 1, 2013
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U.S. employers added 157,000 jobs in January, and hiring was stronger over the past two years than previously thought, providing reassurance that the job market held steady even as economic growth sputtered.

The mostly upbeat Labor Department report Friday 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 job gains are derived from a separate survey of employers.

The hiring picture over the past two years looked better 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, up from previous estimates of about 150,000.

And hiring was stronger at the end of last year, just when the economy faced the threat of deep spending cuts and tax increases from the fiscal cliff. Job growth averaged 200,000 in the final three months.

Stock futures rose after the report was released.

One notable change in the job market is the stronger contribution from construction companies. They added 28,000 jobs in January and nearly 100,000 in the past four months. The gains are consistent with a rebound in home construction and a broader recovery in housing.

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., a possible sign of recession.

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 3.5 years. The decline was driven largely by a steep cut in defense spending and a drop in exports. Many, but not all, analysts 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.

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  1. A couple of issues need some clarification especially since my name was on the list. I am not sure how this information was obtained and from where. For me, the amount was incorrect to begin with and the money does not come to me personally. I am guessing that the names listed are the Principal Investigators (individual responsible for the conduct of the trail) for the different pharmaceutical trials and not the entity which receives the checks. In my case, I participate in Phase II and Phase III trials which are required for new drug development. Your article should differentiate the amount of money received for consulting, for speaking fees, and for conduct of a clinical trial for new drug development. The lumping of all of these categories may give the reader a false impression of physicians just trying to get rich. The Sunshine Law may help to differentiate these categories in the future. The public should be aware that the Clinical Trial Industry could be a real economic driver for Indiana since these revenues supports jobs and new job creation. Nationally, this account for 10-20 billion which our State is missing out on to a large degree. Yes, new drug and technology development has gotten most of the attention (e.g. CTSI, BioCrossroads, etc.) However, serious money is being left on the table by not participating in the clinical trials to get those new drugs and medical devices on the market!!!! I guess that this is not sexy enough for academia.

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