Growth of jobs slips to 108,000

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Job gains slowed abruptly last month to 108,000 after surging in November, reflecting a lackluster Christmas hiring season and a slowdown in home building, the Labor Department reported yesterday.

The economy posted a second straight year of job growth over 2 million in 2005, boosted in part by the booming housing market. The unemployment rate fell by a half percentage point to 4.9 percent.

But the disruptions caused by three major hurricanes and record-high energy prices took a toll on the economy by year's end. Jobs at department stores and malls declined by 16,000 last month compared with previous holiday seasons, after having dropped since the summer.

Construction companies laid off 9,000 workers after having hired 42,000 in November to assist in the massive effort to clean up and rebuild flooded New Orleans and the storm-wrecked Gulf Coast.

The job growth was in health care, professional and business services, and manufacturing, which had an uncharacteristically good month with 12,000 new jobs.

Rebuilding activity should continue to boost the economy and jobs this year, analysts said, but December's flat construction hiring after years of strong gains is an omen that suggests the end of the five-year housing boom is starting to weigh on the job market.

"The dip in construction employment -- the first since February 2004 -- was a bit surprising" in light of the rebuilding needs on the Gulf Coast, and "bodes ill" for the construction sector, said Aaron Smith of Moody's Economy.com.

The department said two-thirds of a 246,000 surge in construction jobs last year was generated by the housing boom, and most of a 188,000 jump in finance jobs also were real estate-related.

Adding in jobs at real estate agencies, home improvement and furnishing stores, economists estimate that a third to half of the jobs created since the 2001 recession were generated by the housing market.

Continued strength in jobs at home improvement and gardening stores shows that consumers remain preoccupied with furnishing and decorating the millions of homes they bought in recent years, even as the housing boom fades.

"I'm a believer that the economy will slow, likely significantly, this year" as rising interest rates continue to undermine housing, said David Ader, debt strategist at RBS Greenwich Capital Markets Inc. "Where's the stimulus going to come from? We don't know."

While worries about the fate of housing have plagued Wall Street, the stock market was cheered yesterday by the moderation of job growth last month and took it as a sign that the Federal Reserve soon may stop raising interest rates to cool the economy.

Many economists hope a pickup in business spending and hiring will take up the slack where housing leaves off this year. They say that steady growth in jobs and income should underpin the most important engine of growth -- consumer spending -- and note that wage growth picked up to 3.1 percent last year, the best since 2002.

"The job market still has legs, despite the head fake" created by the sharp slowdown in job growth last month from 305,000 new jobs in November, said John Silvia, chief economist at Wachovia Securities.

He said retail hiring for the past three years has appeared weak only in December. A change in consumer-spending habits caused partially by the use of gift cards has pushed much of holiday spending past Christmas and into the new year.

As a result, he said, hiring is likely to bounce back this month.

The flat month for construction may have been due in part to cool, wet weather in some parts of the country, he said.

Still, Mr. Silvia expects the economy to slow this year as the housing market cools. That, among other things, will take some of the octane out of consumer spending that has been linked to double-digit increases in home values in recent years.

Consumers have been tapping into their growing housing wealth using home-equity loans and cash-out refinancings to maintain spending and make up for weak growth in wages.