The once-depressed housing market is rebounding. A gauge of U.S. service firms' business activity expanded in December by the most in nearly a year. Manufacturing is benefiting from the best auto sales in five years. And Americans spent more at the end of the crucial holiday shopping season.
"There is little doubt that the seeds of faster growth are being planted," James Marple, an economist at TD Bank, said in a note to clients.
That said, most economists expect slight improvement at best in hiring this year. A 2 percentage point cut in the Social Security tax expired Jan. 1. That means a household with income of about $50,000 will have about $1,000 less to spend. A household with two high-paid workers will have up to $4,500 less.
And the government may impose spending cuts this year.Higher taxes and less government spending, along with uncertainty about future budget fights, could restrain growth and hiring. That "likely means acceleration in the labor market will remain elusive for the time being," said Ellen Zentner, an economist at Nomura Securities.