Consumer Confidence

The jump far exceeded forecasts. Economists surveyed by Briefing.com were expecting the index to increase to 53.5.

"Consumers have begun the year in better spirits," said Lynn Franco, director of The Conference Board Consumer Research Center. "Consumers rated business and labor market conditions more favorably and expressed greater confidence that the economy will continue to expand and generate more jobs in the months ahead."

The figure, which is based on a survey of 5,000 U.S. households, is closely watched because consumer spending makes up two-thirds of the nation's economic activity.

Still a long way to go

The index is still well below a healthy reading. An overall reading above 90 indicates the economy is solid, and 100 or above indicates strong growth.

And while a higher number is a positive sign, the index has been volatile and economists are still waiting for a clear trend to emerge.

"The bottom line is, it's pretty good news," said Mike Schenk, senior economist with the Credit Union National Association. "On the other hand, we're a long way from feeling like happy days are here again."

Consumer confidence wavered throughout last year, plunging to a 17-month low of 48.6 in September.

Since then, end of the year stock market gains have helped fuel optimism, as have slight improvements in the job market, Schenk said. Workers were also happy to receive a 2% raise after President Obama signed a payroll tax holiday into effect at the end of the year, he said. 

Consumer ConfidenceValue remains important for Christmas shoppers

Retail Sales

The sales outperformed the federation's forecast of a 3.3% increase, and was the largest percentage increase since 2004, when holiday sales jumped 5.9%.

"Retailers did a tremendous job planning for the season by managing inventory and hitting the right price points that helped them tap into pent-up demand," said Matthew Shay, president of the National Retail Federation.

Strong sales in December of clothing, sporting goods, books and music helped lift retailers in the holiday season, according to the federation.

The National Retail Federation reported an increase of 8.4% in December sales at clothing and clothing accessory stores, and an increase of 8.2% at sporting goods, hobby, book and music stores, compared to the same month in 2009.

After holiday splurge, taste for spending returns

Also, the federation said that stores selling building material and garden equipment reported a 12% increase in December sales, compared to 2009.

This is a big deal for both retailers and the economy. For retailers, year-end holiday sales can account for as much as 50% of their sales and profits for the full year.

Since consumer spending also fuels more than two-thirds of the economy, the hope is that a pick-up in spending means that Americans are feeling more secure about their jobs and spending ability.

Earlier Friday, government statistics showed that sales increased in December, although they fell just shy of economists' expectations.

Overall sales rose 0.6% last month to $380.9 billion, the Commerce Department said. Sales were expected to have gained 0.7%, after rising 0.8% in November, according to a consensus of economists surveyed by Briefing.com.

Month-to-month sales, excluding autos, rose 0.5% in December, falling short of the forecast for an increase of 0.6%.

0:00/2:39Stores of the future

Retail sales rose 7.9% in December, compared to the year-ago month, according to the government. Retail sales rose 6.6% for all of 2010 compared with the prior year.

Non-store sales, which are primarily online sales, rose 2.6% month over month in December, the biggest percentage gain for any sector in the report. Other strength was reported among building supply merchants, health care retailers and gasoline stations.

Dragging on the report were sales at miscellaneous merchants such as florists and gift stores, down 1.3%. Also lower were sales at general merchandise stores, as well as electronics stores and food stores.

-- CNNMoney senior writer Parija Kavilanz contributed to this story  

Retail SalesMeager increase forecast for holiday retail sales

January jobs report disappoints

Economists surveyed by CNNMoney were expecting the economy to add 149,000 jobs during the month, and the unemployment rate to rise to 9.5%.

After the report was released, economists weren't quite sure what to make of the numbers, and used a mix of colorful adjectives like "lousy," "mysterious," and "confounding."

But one thing was clear -- weather played a large role in January.

"It's a disappointing employment report, with a touch of skepticism because of the weather's impact on the overall number," said John Silvia, chief economist with Wells Fargo.

Major storms across large swaths of the country had a huge impact on businesses. According to the Labor Department's household survey, which calculates the unemployment rate, severe winter weather kept 886,000 people from going to work during the week of January 9.

All those snow days kept a lot of companies from hiring, said economist John Canally with LPL Financial. It's possible that nasty weather could have reduced the overall payroll number by about 100,000, he said.

The Labor Department also announced that job growth last year was weaker than originally stated. After 2010 revisions, there were about 900,000 jobs created during the year -- 215,000 fewer than previously reported.

The labor market typically needs at least 300,000 job gains each month to make a difference in the unemployment rate, economists say, and at least 150,000 to keep pace with population growth.

Headed in the right direction?

While the sluggish growth to payrolls was disappointing, the drop in unemployment was interpreted in different ways.

Some economists thought it was a result of people dropping out of the labor force, though others pointed to a once-a-year population adjustment based on census data that skewed the numbers.

Almost all of the drop was due to unemployed people finding jobs again, said Zach Pandl, an economist with Nomura Securities.

"This part of the report deserves a positive interpretation," he said.

Overall, the unemployment rate has had its largest two-month decline since 1958, he said.

0:00/04:30Labor Secretary explains jobs report

The two parts of the report sometimes differ, because they're derived from separate surveys. While the payroll number stems from a survey of employers, the unemployment rate comes from a different survey of American households.

Canally said he expects the job market to show a spike in payrolls in February, and then resume a gradually improving trend. Any improvements though, are still likely to be at a very slow pace.

"People should not be too fearful of losing a job they have," Canally said. "But if they don't already have a job, it's still tough. Companies are still reluctant to hire." 

Job GrowthGood jobs vanish, may never return

Home prices

"With these numbers, more analysts will be calling for a double-dip in home prices," said David Blitzer, spokesman for Standard & Poor's.

The worst-hit market during the month was Detroit, where prices fell another 2.7%. That was especially troubling considering how low that city's prices already were. In Washington D.C. prices inched down only 0.1%, making it the second-best performing city behind San Diego.

Where to rent vs. buy

The bleeding in some of the bubble markets seems to have slowed, with Las Vegas (-0.4%), Miami (-0.2%) and Tampa (-0.8) all recording losses of under 1%. But nine markets -- Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, Portland, Ore., Seattle and Tampa, Fla. -- are all at their lowest levels since they peaked during the boom.

The latest downturn put prices 1.6% lower than 12 months ago, slightly worse than industry expectations. A panel of analysts put together by Briefing.com had forecast a 1.5% annual decline.

The loss was "bigger than I expected," said Pat Newport, a real estate market analyst for IHS Global Insight. "I think it's still a response to the [home buyer] tax credit going away."

The credit, which paid homebuyers up to 10% of the purchase price up to $8,000, expired in September 2010. Analysts say it pushed a lot of homebuying forward, as many people rushed to buy to get in under the wire.

Despite the bad report, Newport said there are still a couple of reasons for optimism. He pointed out that existing home sales have been on the rise recently, topping an annual rate of 5 million sales in December. He added that home prices calculated by the Federal Housing Finance Agency have shown less decline than Case-Shiller. The FHFA index was unchanged in November after dropping 0.2% in October.

The FHFA index covers the entire national market and not just 20 cities, but it only includes data from homes sold that had mortgages guaranteed by Fannie Mae and Freddie Mac, the government run mortgage companies.

Record 1 million homes repossessed in 2010

That means Case-Shiller's calculations include a higher percentage of distressed properties -- foreclosures and short sales -- since Fannie and Freddie would not guarantee the exotic types of mortgages that generally go bad.

Barclay's Bank analyst Theresa Chen doesn't expect a reversal in housing market trends any time soon, since there is no end in sight to the foreclosure crisis.

"We expect softness to persist," she said, "as home prices continue to face headwinds from the large pipeline of foreclosures entering the market." 

Nashville area’s median home price is highest in 2 yearsHome prices

Obama to address business lobby

Once there, he will deliver a speech to more than 200 members of the Chamber, a business lobby that is among the most influential players in Washington.

The meeting is seen as another sign of the thawing relationship between the Obama administration and the business community. It took months to materialize after first being floated by the administration in November.

For Obama, it will mean playing nice with a group that has been vocally opposed to many of his policies.

Indeed, in the months leading up to November's midterm elections, the White House and Chamber lobbed rhetorical rocks back and forth at one another.

The Chamber opposed Obama on health care, tax policy, regulation and Wall Street reform. And they backed their words with cash. In 2010, the group gave millions of dollars in campaign donations to Republican candidates.

Obama responded by using the Chamber as a political punching bag in the final days of the campaign, accusing the group of funneling money from overseas to support Republican candidates.

0:00/2:36Obama's biggest task: Job growth

But shortly after the election, both sides began to sing a different tune. Obama invited 20 CEOs to the White House for a conversation about the economy. The Chamber praised the move.

And during the lame-duck session of Congress, Obama and Republicans reached a compromise on a tax cut package that was supported by the Chamber, and he reached a free trade agreement with South Korea that won plaudits from the business community.

Then Obama had another "CEO summit," and focused much his State of the Union message on innovation and spurring job growth.

J.P. Fielder, a spokesman for the Chamber, said Friday the organization was looking forward to Obama's visit.

"From our perspective we are honored and pleased to have him coming over," Fielder said.  

China currency report delayedAsk Monster.com, and White House will answer

GDP

But that's still weaker than expectations. A group of 27 economists surveyed by CNNMoney had predicted GDP growth of 3.5%.

"The U.S. economy is finally, after three years, producing as much as it did before the Great Recession hit. But this is by no means 'mission accomplished,'" Economic Policy Institute economist Josh Bivens said in a research note.

"The 3.2% growth registered in the last quarter of 2010 would, if sustained over the next year, provide almost no downward push to the unemployment rate," he said.

The faster pace came mainly on the backs of American consumers, who headed back to the shopping malls during the holiday season. Personal consumption, a measure of consumer spending, jumped by 4.4% in the fourth quarter -- the strongest increase in that reading in at least four years.

"Consumer spending had an outstanding quarter," said Scott Brown, chief economist with Raymond James. "While some of that is due to a drop in the savings rate -- which isn't really sustainable -- it could also be a sign that consumers are less worried about losing their jobs."

Spending on so-called durable goods like cars and furniture rose a whopping 21.6%. Spending on nondurable goods like food and clothing was up 5%.

While the U.S. is struggling with a massive trade deficit, it improved slightly in the fourth quarter, lifting the overall GDP number. Exports increased at a rate of 8.5%, while imports decreased by 13.6% -- slightly narrowing the trade gap.

Not all cylinders of the economy were firing away though.

0:00/1:59State of the Economy (in 2 mins)

A slower pace of business inventories was the main drag on the overall number. Private businesses increased inventories by $7.2 billion in the fourth quarter, a stark contrast to $121.4 billion in the third quarter and $68.8 billion in the second.

Commercial and residential construction activity also decelerated significantly.

The government calculates GDP as a measure of goods and services produced in the United States. The number is backward looking and is often revised multiple times. This is the first reading for the fourth quarter.

For the year as a whole, real GDP was up 2.9%, a complete turnaround from the 2.6% decrease seen in 2009.  

GDPCar sales indicate a strong October

Job Growth

While a sharply lower unemployment rate was a welcome surprise, some experts said that drop was mostly due to a shrinking workforce.

"A lower unemployment rate is a mixed blessing," John Silvia, chief economist at Wells Fargo said in a note. "Yes, we are getting more people employed but we appear to be losing people into the woodwork -- not a good sign long term."

Economists surveyed by CNNMoney were expecting the unemployment rate to ease to 9.7%, from 9.8% in the previous month.

The payroll number was a clear disappointment. Economists predicted a gain of 150,000 jobs, and many had boosted their forecasts earlier in the week, after private payroll processor ADP released a shockingly strong report.

While that report is often seen as a bellwether for the Labor Department's number, this is the second month in a row that the government figures came in disappointingly lower.

0:00/4:18Who's getting hired

Because temporary holiday hiring is typical for the end of the year, the raw numbers are seasonally adjusted to account for those extra jobs. But since the recession, economists have struggled to account for new changes in consumer and business behavior, which may have distorted the figures and caused volatility in the various readings.

"What we're using is patterns from previous years to adjust this year's numbers, and in a dynamic economy that is not going to always work," said Stephen Bronars, a senior economist with Welch Consulting.

According to Friday's report, businesses added only 113,000 jobs to payrolls in December. The government continued to shed staff, cutting 10,000 workers.

October was revised up to 210,000. November was revised up to 71,000, slightly better than economists' forecasts for a revision to 62,000.

More jobs, but fewer workers

While the payroll number stems from a survey of employers, the unemployment rate comes from a household survey. It includes only workers who are actively looking for jobs, and not the so-called "discouraged workers" who have given up their job searches.

Discouraged workers in December ticked up to 1.3 million, with those workers falling off the the unemployment rate calculations.

0:00/3:33Job market's slow take-off

About 260,000 adults dropped out of the labor force for various reasons, and were no longer counted as unemployed by the government. The overall participation rate in the U.S. labor force fell to a new recession low of 64.3%.

"Incredibly, the U.S. labor force is now smaller than it was before the recession started, though it should have grown by over 4 million workers to keep up with working-age population growth over this period," said economist Heidi Shierholz of the Economic Policy Institute.

While positive job growth still brings some hope for 2011, there's still a long way to go to recover the 8.5 million jobs lost since the Great Recession began.

Teens and blacks face highest unemployment

The labor market typically needs at least 300,000 to make a difference in the unemployment rate, economists say, and at least 150,000 to keep pace with population growth.

Overall, the economy rounded out 2010 with 1.1 million jobs added, the best year for hiring since 2007. And job growth is still trending upward, albeit very slowly, with an average of 128,000 jobs a month added in the last quarter of the year.

"The message here is, we are seeing improvement, and it's a report that hints at more future strength," said economist Robert Brusca of FAO Economics. "The glass may only be half full, but it is at least half full." 

Job GrowthGood jobs vanish, may never return