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    Jobless rate held steady amid fiscal cliff uncertainty

    The construction sector was driven in part by rebuilding following Hurricane Sandy.
    Reuters/File 2012
    The construction sector was driven in part by rebuilding following Hurricane Sandy.

    The US economy made slow progress in December as employers continued to hire cautiously while political leaders brought the nation to the edge of the fiscal cliff.

    Employers added a modest 155,000 workers last month, not enough to lower the unemployment rate, which held at 7.8 percent, the Labor Department reported Friday.

    Employers added an average of 153,000 jobs a month throughout 2012, about the same pace of job growth in 2011.


    “It’s not a great number, but it’s not a bad number either,” said Nariman Behravesh, chief economist at IHS Global Insight, a Lexington forecasting firm. “Businesses are still very cautious and were super cautious in December, mostly because of the fiscal cliff.”

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    Stocks rose modestly Friday. The Dow Jones industrial average gained 44 points to close at 13,435. The broader Standard & Poor’s 500 index rose 7 to 1,466, and the technology-heavy Nasdaq Composite added a point, closing at 3,102.

    Health care employment added 45,000 jobs, and jobs at restaurants rose by 38,000 in December. Some of the biggest gains came in the struggling construction sector, which gained 30,000 jobs over the month, driven in part by rebuilding following Hurricane Sandy.

    Sung Won Sohn, a professor of economics at California State University, said such gains are a sign that the economy continues to heal, even though he expects the pace of job growth to remain modest over the next several months and unemployment to remain relatively unchanged.

    Sohn said he expects more discouraged workers who had given up job searches to resume looking for work, adding to the number of unemployed and keeping the rate higher. (The government only counts active job seekers as officially unemployed.)


    An improving housing market and increased construction activity will also give the economy a lift after years of stagnation.

    “They are no longer a drag on the economy and are a source of strength,” Sohn said. “The aftermath of the superstorm Sandy has been adding jobs as rebuilding continues.”

    One out of 8 jobs was estimated to be related to housing during the last housing boom, including jobs tied to housing finance and mortgages, he said.

    “The importance of housing in the economy should not be underestimated,” Sohn said.

    Overall, the US economy has slowly improved since the housing market collapse and financial crisis of 2008. While the unemployment rate is at its lowest since the end of the recession in June 2009, it has remained relatively unchanged since September.


    About 12 million Americans are looking for work unsuccessfully, and about 5 million of them, or 40 percent, have been looking for a job for more than six months or more.

    As part of the fiscal cliff deal, Congress renewed federal emergency unemployment insurance benefits to help the long-term unemployed for the 11th time since the recession began.

    But economists worried that political uncertainty continues to negatively affect business decisions, including hiring. Congress and the White House reached an 11th-hour compromise on the fiscal cliff that will raise taxes for most Americans but postponed acting on automatic federal spending cuts for two months.

    That means more rancorous debate and uncertainty, a political pattern that has put businesses that rely on government spending in a state of perilous limbo. In Massachusetts, billions on defense and research spending are at stake unless Congress reaches another compromise.

    Brian Bethune, an economics professor at Gordon College in Wenham, said he did not expect the spending issues facing Congress to weigh heavily on the economy, noting that the defense and nondefense spending cuts that will automatically go into effect unless Congress acts to account about $100 billion.

    Congress is considering spending about half that amount in Hurricane Sandy relief funding alone.

    “It’s good that we have some momentum starting off 2013, instead of a fade,” he said. “What’s key is a credible spending containment package that will play out over several years.”

    Megan Woolhouse can be reached at