The Street is in for a surprise this morning. The Labor Department announced that December nonfarm payrolls rose by an unexpected 167,000. This increase was much higher than the jump of 100,000 forecasted by economists.
What's more, the unemployment rate came in at 4.5 percent.
This surprising spike in payrolls has helped to crush any hopes held by those on the Street that the Federal Reserve would soon cut interest rates. Economists had expected job growth to slow from November, especially following release of the ADP employment report on Wednesday, which showed a 40,000 decline in private-sector payrolls.
Elsewhere in the report, job growth in the previous two months was revised higher by a total of 29,000.
According to the report, payrolls swelled by 1.84 million in 2006, an average of 153,000 per month. The unemployment rate slipped from 4.9 percent at the start of 2006 to 4.5 percent.
Meanwhile, average hourly earnings jumped by eight cents, or 0.5 percent, compared to the consensus estimate for an increase of only 0.3 percent. During the past 12 months, average hourly earnings have increased 4.2 percent.
Digging into the various industries, job growth was strong in professional services, which added 50,000 workers in December and 420,000 in all of 2006. Elsewhere, health care added 31,000 jobs in December and 324,000 in the year.
The food services industry also saw an increase, as it added 23,000 in December and 304,000 for the year.
However, the construction industry contracted, as jobs fell by 3,000 after seasonal adjustment. Residential construction jobs fell by 16,000, but those losses were partially offset by gains in nonresidential construction.
Manufacturing jobs dropped by 12,000 in December, the sixth consecutive decline. In the past year, factory jobs have fallen by 72,000. The losses in December were concentrated in autos, primary metals and textiles. Of 84 manufacturing industries, just 44.6 percent were adding jobs in December.
Retailers also cut their staff, shedding 9,000 jobs after seasonal adjustment. Retail jobs fell by 58,000 in 2006.
Of 278 industries, 58.6 percent were adding jobs in December.