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US economy gathers steam

Jan. 6: The US added a robust 200,000 new jobs last month, the labour department said today, in a sign that the long-awaited economic recovery has finally built up a head of steam.

The nation’s unemployment rate fell to 8.5 per cent in December, from a revised 8.7 per cent in November, the government said. The labour department revised the number of new jobs added in November to 100,000, from 120,000.

The employment report built on a flurry of heartening economic news in December, when consumer confidence rose, manufacturing came in strong and small businesses showed signs of life.

It was the sixth consecutive month that the economy added at least 100,000 jobs not enough to restore employment to pre-recession levels, but enough, perhaps, to cheer President Obama as he enters an election year.

The upward trend restored some of the ground lost this spring and summer, when global events like the earthquake in Japan and domestic ones like the debt ceiling debate slowed the American recovery to a crawl and raised fears of a second recession. Then, even signs of modest growth were dismissed as too anaemic. Now, they are drawing tentative praise. “People were very much thinking that the sky was falling,” said Tom Porcelli, an economist at RBC Capital Markets. “It’s no small victory that we’re up here, even with all these headwinds.” Up here, Porcelli was quick to note, is none too lofty a perch.

Lowering the unemployment rate significantly would require many more jobs a month than the economy has been adding. And there are several factors that could weigh down what momentum there is.

Congress may yet decline to continue extensions of the payroll tax break and unemployment benefits that have given families a lift and boosted spending.

Money, in the form of loans, is still hard to come by. Home values continue to drop. And though the most recent numbers make it appear the US is shrugging off the troubles in the euro zone, a severe slowdown there or, worse, a catastrophic financial collapse, is still a threat.

Still, optimists were quick to trumpet the American economy’s resilience. “This is the real thing,” said Ian Shepherdson of High Frequency Economics. “This is finally the economy throwing off the shackles of the credit crunch.”

 
 
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