US economy boosted by hiring surge

By LUCY FARNDON
Updated: 03:53 EST, 6 January 2011

There were further signs that the US economy is on the move, after a jump in hiring by companies.

Surprise boost: US employers added triple the number of jobs expected in December

Employers in America added 297,000 jobs in December, according to a payrolls report. This was triple the amount forecast by economists, and compares with a gain of 92,000 in November.

The surprise boost reversed declines on UK and US stock markets.

It has raised hopes that a more authoritative labour market report due to be released by the US government on Friday - the non-farm payrolls - could contain good news.

Yesterday's ADP Employer Services data is not always accurate in predicting outcomes. However, Tom Porcelli, a US economist at RBC Capital Markets, said: 'You cannot ignore the strength of this report.'

Separately, consultants Challenger said planned layoffs at US firms dropped to the lowest level in 10 years during December.

There were just 32,004 planned job cuts, down by a third from the previous month, with evidence that the automotive and retail sectors are through the worst.

The improving employment outlook helped lift the Dow Jones index in early trade and reversed losses on the FTSE, which closed up nearly 30 points at 6043.

The dollar also received a boost, as economists pointed to the fact that America is recovering far faster than the UK, helped by a massive state spending programme.

Sterling slipped to $1.5487, after disappointing construction data suggested that Britain remains on shaky ground despite strong manufacturing data earlier in the week.

The Markit/CIPS construction index fell to 49.1 in December from 51.8 in the prior month, far weaker than forecast, suggesting that the decline could not just be blamed on the freezing weather.

This was the first time construction activity had contracted since February 2010.