WASHINGTON -- The government is expected to report Friday that businesses stepped up hiring in December, a trend likely to gain momentum in 2011.
Economists are predicting that employers added a net total of 145,000 jobs last month and that the unemployment rate dipped to 9.7 percent.
Some are even more optimistic after a private payroll firm estimated this week that companies added nearly 300,000 jobs in December. Also encouraging was a report that fewer people applied for unemployment benefits over the past month than in any four-week period in more than two years.
A decline in layoffs has consumers feeling better about the economy and spending more freely. This past holiday shopping season was the best in four years.
And a payroll tax cut that goes into effect this month will give Americans even more money in the new year. Economists expect that will boost economic growth and give businesses more confidence to hire.
"Consumers are no longer as concerned about their job security, and that's giving them a little more confidence to go out and spend," said Ryan Sweet, an economist at Moody's Analytics.
The economy needs to generate about 125,000 jobs a month just to keep up with population growth and prevent the unemployment rate from rising. More than double that amount is needed to reduce the rate.
Last year, the nation added an average of 86,500 jobs a month through November. The unemployment rate, meanwhile, actually rose -- from 9.7 percent in January to 9.8 percent in November.
But many economists expect hiring to ramp up in 2011. Goldman Sachs projects that employers will add 2.2 million jobs this year, or about 180,000 a month, double last year's amount. Moody's Analytics puts the figure at about 250,000 per month.
Still, the recession left a deep hole in the job market. More than 7.3 million jobs were eliminated during the downturn. Most economists expect the unemployment rate will still be near 9 percent by the end of 2011.
Federal Reserve Chairman Ben Bernanke, who is scheduled to testify about the economic outlook Friday on Capitol Hill, has said it will take years for the unemployment rate to return to a healthy level of about 5.5 percent.
One positive development is that small businesses are starting to add more workers after lagging behind their larger counterparts. The National Federation of Independent Business said Thursday that its measure of the small business hiring outlook rose to its highest level in more than two years in December.
Meanwhile, applications for unemployment benefits rose last week to a seasonally adjusted 409,000, the Labor Department said Thursday. Still, that's not much higher than the 391,000 level reached in the previous week -- the lowest in more than two years -- and week to week figures tend to fluctuate more during the holidays.
A more reliable measure is the four-week average for applications. That fell last week to 410,750, the lowest level in nearly two and a half years and the eighth decline in nine weeks.
Fewer than 425,000 people applying for benefits signals modest job growth. And applications are far below their peak during the recession of 651,000, reached in March 2009. Still, economists say applications need to fall consistently to 375,000 or below to substantially bring down the unemployment rate.
The weekly unemployment benefits numbers provide a real-time snapshot of the job market. Applications reflect the level of layoffs, but can also indicate whether companies are willing to hire.
Separately, the International Council of Shopping Centers said that consumers increased their spending in November and December by 3.8 percent, the largest increase in holiday spending since 2006.