The Dow Jones industrial average closed above 14,000 for the first time in more than five years, propelled Friday by reports of a steadily improving job market.
That gain came on the heels of a report by the Labor Department that said the US economy added 335,000 more jobs last year than first estimated. The rosier picture helped spur a rally on Wall Street, pushing the Dow Jones industrial average up 149 points to close at 14,009.79, capping five straight weeks of gains. It was the highest close since October 2007.
“The economy has some healthy momentum right now,” said University of California economics professor Sung Won Sohn. “We’re gathering steam, and all cylinders are firing. We’re not going 100 miles per hour, but certainly 40 or 50 miles per hour.”
Employers added 157,000 jobs last month, but it was not enough to keep up with the increased number of workers seeking jobs. The unemployment rate rose to 7.9 percent in January, from 7.8 percent in December.
Government officials use data from separate surveys of employers and households to estimate the number of jobs created and the unemployment rate each month. Both numbers are subject to revisions as more information becomes available.
In Friday’s report, the Labor Department said the nation added 196,000 jobs in December, up from the initial estimate of 155,000. In November, the nation added 247,000 jobs — 86,000 more than first reported. “We’re probably on a slightly stronger jobs trajectory than people had thought,” said Nigel Gault, chief US economist for IHS Global Insight.
Still, Gault said, unemployment remains high because employers, who have experienced an uncertain recovery, have been further unnerved by a lack of clear budget priorities among congressional leaders. Congress is now considering whether billions in across-the-board federal spending cuts will take effect in March.
He estimates job growth of about 170,000 jobs a month on average for 2013, somewhat less than the 181,000 per month last year. “The private sector, I think, can and will accelerate, but not this year,” because of tax increases and budget cuts, he said.
Government cutbacks have already been a drag on the economy. Federal, state, and local governments sliced 77,000 jobs last year after cutting 317,000 in 2011, according to the Labor Department. Government shed another 9,000 jobs in January.
Arne L. Kalleberg, a professor of sociology at the University of North Carolina at Chapel Hill and author of “Good Jobs, Bad Jobs” about the earning gap between high- and low-skill workers, said that trend is “a real source of concern.”
“These were good jobs, steady, secure, and well paying, and they are required if we are going to make investments in our future,” he said. “We’ve got to continue to create jobs, stimulate the economy, and make investments in infrastructure .”
Harvard University economist Kenneth Rogoff said the recent pace of job growth is “mildly positive” and has gradually chipped away at unemployment. But, he said, the economy needs to grow much faster to clear the backlog of unemployed and underemployed workers. More than 20 million Americans are unemployed, working part time because they can’t find full-time jobs, or no longer looking for work.
“The economy needs to add 250,000 to 300,000 jobs a month, and even then it would take several years to bring the unemployment rate down,” he said, “so this is an economy that’s growing, but not nearly fast enough.”
Rogoff said spending on infrastructure is important to the ongoing recovery, within bounds.
Ultimately, he said, the size of government needs to shrink because state and local government in particular became bloated in the early 2000s, adding jobs “at a ferocious clip.” But he said this may be a good time for government to spend more on roads, bridges, and other public works, even if it means running a slightly bigger deficit.
“We’re running very large deficits and we can’t do it forever, but you want to scale back very slowly,” he said.
“I wouldn’t step harder on the brakes right now. The recovery is still very fragile.”Megan Woolhouse can be reached at firstname.lastname@example.org. Follow her on Twitter @megwoolhouse.