NEW YORK (CNN/Money) - The pace of hiring picked up in December, the government said Friday, but job growth remains stubbornly sluggish more than three years after the end of the last recession.
The closely watched Labor Department report showed a seasonally adjusted 157,000 jobs added to U.S. payrolls last month, up from a revised 137,000 in November. Economists had forecast there would be 175,000 jobs created, on average, according to a survey by Briefing.com.
The unemployment rate held steady at 5.4 percent, in line with economists' forecasts.
Friday's report again raised concerns that employment and economic growth could be more sluggish than expected going into 2005. The 157,000 new jobs is roughly what is needed to keep pace with population growth each month.
"Private sector job growth is still challenged," said economist Robert Brusca of FAO Economics. "The report is not very good for the month alone, but the trends have actually improved, thanks to the revisions."
The number of jobs created since the last recession ended in November 2001 has been the lowest of any economic recovery in the United States since World War II.
Still, there were some bright spots in Friday's report. The department revised November payroll growth up by 25,000 so the resulting two-month growth in payrolls is closer to what economists expected.
That seemed to convince investors that the Federal Reserve is likely to stay the course of interest rate hikes going forward.
On Wall Street, stocks opened higher but quickly gave up the gains.
Treasury bond prices rose after the report as investors bet the weaker-than-expected reading would put less upward pressure on interest rates, but then fell back, sending yields back where they were.
In its report, the department said average hourly wages edged up just 2 cents to $15.86. That left the average hourly wage up by 2.7 percent over a year earlier, or less than the 3.5 percent rise in prices in the 12 months ending in November, the latest data available.
"This report is actually quite favorable for financial markets since we see very little inflation pressure while simultaneously seeing job creation inching up," said Anthony Chan, senior economist with JPMorgan Fleming Asset Management.
"Additionally, it was encouraging to see a small increase in the length of the work week, which usually serves as a leading indicator of future employment growth."
The average work edged up a tenth of an hour to 33.8 hours last month.
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Overall this is the best year for the labor market under the Bush Administration. The report shows 2.2 million jobs added during the year, bringing the year-end total to 132.3 million.
But the growth was still below the White House forecast last February that 2.6 million new jobs would be created in 2004.
And the number of people on payrolls at year-end stands 122,000 below where they were in January 2001, when Bush was sworn into office, putting him at risk of being the first president since Herbert Hoover to see a drop in employment during a term in office.
The report showed that retail employment was off 20,000 in December. But since the report is adjusted for seasonal changes, such as pre-holiday hiring by retailers, that decline was probably an indication that the hiring gain in the sector in the month was less than anticipated by the Labor Department model.