US economy likely began 2012 with solid job growth

The U.S. economy likely produced another solid month of hiring in January, a promising start for 2012.

Economists forecast that employers added a net 155,000 jobs last month and that the unemployment rate remained 8.5 percent for a second straight month, according to a survey by Factset.

The unemployment rate has fallen for four straight months. It's at its lowest level in nearly three years. The government will the January unemployment report Friday morning.

A gain of 155,000 jobs would be down slightly from December, when employers added a net 200,000. Still, it would mark the seventh straight month in which at least 100,000 jobs have been added. That hasn't happened since 2005.

On Friday, the government will also issue its annual revisions to earlier jobs figures. The revisions are expected to show that hiring was stronger over the past two years than previously thought. The government has said the economy added about 1.6 million jobs last year, nearly twice as many as in 2010.

Even with the gains, the job market faces a long way back to full health. The U.S. has about 6 million fewer jobs than it did when the recession began in late 2007.

And analysts expect seasonal layoffs to weigh on the January job figures. The government, for example, reported a big gain in the number of courier and messenger jobs in December. That largely reflected hiring by delivery services, such as UPS and FedEx, which bulked up to handle online holiday sales. Most of those jobs were probably lost last month.

Still, several reports signaled this week that the economy is improving gradually. Manufacturers expanded at the fastest pace in seven months in January, a private survey showed.

And fewer people sought unemployment benefits last week, the Labor Department said. The four-week average of applications fell to its second-lowest level since June 2008. The drop shows that companies are cutting fewer jobs, which usually leads to more hiring.

Americans spent more at big chain retail stores last month compared with a year earlier. And automakers began 2012 with a strong sales gain in January. Healthier auto sales can boost a range of companies, from steel makers to parts suppliers to shippers.

The economy expanded at a 2.8 percent annual pace in the October-December quarter, a full percentage point higher than in the previous quarter.

Even so, economists expect slower growth this year. Much of the fourth quarter's expansion was due to companies ordering more goods to restock their warehouses. Restocking is likely to slow in the first three months of this year. That would drag on growth.

Europe's financial crisis could also slow demand for U.S. goods. And average wages failed to keep up with inflation last year. That leaves consumers with less spending power, which can hamper growth.