Why the so-so jobs numbers are better than you thinkJanuary 4, 2013: 11:38 AM ET
The December jobs report suggests that corporate America was more confident in Congress than many of its leaders led us to believe.
FORTUNE – Despite the shenanigans in Washington, the U.S. economy in December created just enough jobs to keep up with all those entering the job market. This isn't stellar, but having 155,000 more jobs isn't an apocalyptic mess either.
Which makes it hard not to wonder if CEOs were more confident in Congress and President Obama than they led us to believe. In the months before billions of dollars worth of spending cuts and tax hikes were set to kick in Jan. 1, leaders in corporate America warned lawmakers the economy could be in for another recession if they didn't get their act together and come up with a deficit-reduction plan. The uncertainty, executives from Boeing, Starbucks, Honeywell and General Electric, among others, said, was keeping companies from hiring and investing more in the economy.
Congress finally struck a deal – even if only barely. Despite all the doomsday scenarios and last-minute negotiations, Friday's jobs report suggests companies generally conducted business as usual. In December, the unemployment rate remained unchanged from November at 7.8%. The biggest job gains came in the health care, food services and manufacturing sectors.
And construction jobs finally picked up – adding to the evidence that the housing industry has indeed continued to recover with builders building more homes and apartments, says Jed Kolko, economist at Trulia, an online real-estate listings service, in a report released Friday. During the past quarter, overall construction jobs rose at an annual rate of 3.3%. Jobs in residential construction rose at a 2.3% annualized rate – all ahead of overall employment, which grew by 1.4% during the same period. To be sure, residential construction jobs are still below 1.2% for the year. But that might be only a matter of time. Kolko adds that employment among 25 to 34-year-olds – the prime age range for housing demand – rose to 75.6% in December, compared with 73.9% a year earlier.
If anything, it appears corporate America might have been somewhat more confident in our government than consumers. Retail sales for December, the busiest shopping season of the year, were mixed. This conflicts with consumer confidence, which generally held steady, and at times, surged during the last few months of the year. The 17 retailers tracked by Thomson Reuters reported 4.5% growth in same-stores sales in December, above estimates of 3.3% growth and the 4.2% increase from a year earlier. Without strong sales from Costco (COST), however, the year's increase would have been a paltry 2.8%.
Target (TGT) was among the retailers that reported disappointing sales. "December sales were slightly below our expectations, as strong results late in the month did not completely offset softness in the first three weeks," Target Chief Executive Gregg Steinhafel said in a release. Target had expected a 0.8% rise, but reported flat same-store sales.
And in an unlikely miss, Limited Brands (LTD), which operates Victoria's Secret and Bath & Body Works, posted a 3% increase in same-store sales. Executives had expected a 4.5% increase.
Months from today, it will be worth watching how America's budget woes could impact the job market. Congress and the White House might have technically averted the fiscal cliff earlier this week, but uncertainties over taxes and spending remain. All this could certainly hold back the economy from doing better. At the end of February, the U.S. Treasury is expected to be unable to pay all the government's bills unless Congress raises the federal borrowing limit – the so-called "debt ceiling." And on March 1, the across-the-board spending cuts from the fiscal cliff that lawmakers deferred in this deal are scheduled to kick in and reduce military and domestic programs.
And even if Washington gets all this sorted out in time, it's worth watching if the end of the payroll tax cut will translate to less spending across U.S. households. Click here to see how much less you'll see in your paycheck this year.