MICHELE NORRIS, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris. There's good news on the economy today. Employers added more jobs than anyone expected, 167,000 in December, and the Labor Department said today that unemployment held steady at 4 and a half percent. For all of 2006, employers added 1.8 million jobs. That's also a relief. Last year, many people worried that the cooling real-estate market would hurt job growth and tip the country into recession. NPR's Frank Langfitt reports.
FRANK LANGFITT: After years of spiraling prices and even bidding wars, the housing boom was over by 2006. In markets around the country, house prices fell for the first time in more than three decades. Nigel Gault is a U.S. economist for Global Insight. He recalls why people were worried.
Dr. NIGEL GAULT (Economist, Global Insight): Given that performance of the housing market, people would naturally worry, okay, what's going to happen to construction employment and what are the spillover effects going to be on the rest of the economy, on consumer spending, et cetera?
LANGFITT: The answer so far: not that much. Overall, the job market has proved remarkably resilient. Of course, the slump in housing market did take a toll. Residential construction jobs fell sharply, but growth in commercial and heavy construction offset those losses. And Nigel Gault thinks the housing slump actually boosted the commercial real-estate sector.
Dr. GAULT: All the sort of construction resources were getting pulled into residential construction. Now, I think, with residential slowing down, it's actually made room for more growth in the rest of the construction sector.
LANGFITT: In recent years, high housing prices fueled consumer spending, as people borrowed money based on the increased value of their homes. So there was concern that when the housing market turned, people might stop spending. But that hasn't happened. Speaking from the trading floor of Lehman Brothers, analyst Drew Matus explains why.
Mr. DREW MATUS (Analyst, Lehman Brothers): If you bought your house, you know, even as late as two or three years ago, you've probably experienced enough home price appreciation. So, if you bought a house for $200,000 and it's now worth $300,000, and it pulls back by 10 percent, you're still up, and you're ahead of the game, and so why would you cut back on your consumption?
LANGFITT: Earlier last year, people also became worried that spiking gas prices would batter the job market. Nigel Gault of Global Insight says that the fact that prices went up and then came back down helped reduce the impact.
Dr. GAULT: It's been a year of huge fluctuations in gas prices. We did indeed hit three bucks for a while, but of course then we fell very, very sharply. And so now we're maybe in the $2.30 range. So I think it would have been a different matter if we'd gone to three dollars and stayed there.
LANGFITT: Last year's job market was marked by other welcome trends. Unemployment averaged below 4.6 percent, not too far from what economists consider full employment. After struggling with flat wages, workers saw them rise more than 4 percent before inflation. Although 2006 was a good year, economists say the labor market could face tougher times in the coming months. The residential real estate market may not have hit bottom, and that could mean more layoffs for people who build homes. Frank Langfitt, NPR News, Washington.
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