Unemployment Rate Falls to 4.9%

Unemployment Rate Falls to 4.9 Percent
By JEANNINE AVERSA, AP Economics Writer
Fri Jan 6, 5:18 PM ET

Businesses boosted payrolls modestly in December, and the unemployment
rate dropped to 4.9 percent - evidence, President Bush said, of the
economy's resiliency in the face of last year's hurricanes and high
energy costs. For all of 2005, employers added 2 million new jobs.

The employment report released by the Labor Department on Friday
suggested that the job market headed into the new year in pretty good
shape, analysts said. On Wall Street, the Dow Jones industrials closed
up 77.16 points.

December's jobless rate was down from November's 5 percent rate.
Payrolls grew by 108,000 last month - a figure that was restrained by
job losses in construction, which were blamed on bad weather in some
parts of the country, as well as job cuts in retailing.

Employers, however, ended up adding 71,000 more jobs in October and
November combined than previously reported. That took the sting out of
December's figure, which was about half of what had been expected.

In 2005, the economy added 2 million jobs - an amount that economists
described as solid - and in line with the 2.2 million jobs created
the year before. The economy lost jobs in 2001 and 2002 but saw a small
gain in 2003.

The unemployment rate averaged 5.1 percent last year, an improvement
from the 5.5 percent average registered in 2004.

"We have a sturdy job market," said Mark Zandi, chief economist at
Moody's Economy.com. He expects another 2 million jobs will be created
this year and the average unemployment rate for all of 2006 will drop
to 4.9 percent.

Bush, whose standing with the public has improved but still remains
relatively low, has shifted into a campaign-like mode to shine a
spotlight on the economy's good points in speeches around the country,
including an appearance in Chicago on Friday. His economics team also
fanned out to talk about the economy.

"The American economy heads into 2006 with a full head of steam," Bush
declared.

"We've been through a lot," he said, referring to the 2001 recession,
terror attacks, corporate accounting scandals, high energy prices and
the Gulf Coast hurricanes that have punctuated the economic landscape
over the last five years.

Bush credited his tax cuts with helping the economy and called on
Congress to make them permanent.

Democrats contend that the tax cuts mostly helped the wealthy and
thrust the nation's balance sheets into red ink. The middle class, they
say, is getting squeezed by high health care and energy costs.

"The Bush administration's call for another round of tax cuts for the
wealthy few when middle-class families are struggling to pay their
bills is another example of misplaced Republican priorities," said
House Democratic Leader Nancy Pelosi of California.

In other economics news, consumer confidence sank in early January.

The RBC CASH Index, based on polling by Ipsos, showed that consumer
confidence dropped to 78.2 this month from 85.5 in December. The
decline mostly reflected Americans' anxiety over the economy's
prospects and their own financial positions in the coming months. But
they also felt less confident about the jobs climate.

On the jobs front, employees' average hourly earnings climbed to $16.34
in December, up 0.3 percent from November - slightly more than
economists anticipated.

Compared with a year ago, hourly earnings were up 3.1 percent. "Wages
weren't keeping pace with inflation last year," which is estimated to
be around 3.8 percent, said Lynn Reaser, chief economist at Bank of
America's Investment Strategies Group. So workers are feeling pinched,
analysts said.

To keep inflation in check, the Federal Reserve is expected to boost
short-term rates at its next meeting on Jan. 31. That will mark the
last session for chairman Alan Greenspan, who will retire that day
after 18-plus years at the helm.

Another rate increase could come at the following meeting on March 28
- the first one to be presided over by incoming Fed chief Ben
Bernanke. Either way, many economists believe the Fed's nearly two-year
credit-tightening campaign will be winding down this year.

The employment report also showed that the average time the unemployed
spent searching for work in December was 17.3 weeks, an improvement
from the 17.6 weeks in November.

Most private economists predict the economy will grow respectably this
year - topping 3 percent. Friday's jobs report "suggests decent but
not stellar economic growth," said Nigel Gault, economist at Global
Insight

.