Sensex edges up to two-year high on oil, earnings

MUMBAI (Reuters) - The BSE Sensex edged higher on Friday to touch two-year high, posting its strongest weekly performance since the end of November, as oil companies such as ONGC rose on hopes a proposed change in the government's pricing formula would boost gas prices.
Software services exporters such as Tata Consultancy Services also rose on expectations upcoming October-December earnings results would beat expectations and that the sector would guide for an improved outlook in 2013.
Infosys will kick off earnings on January 11, at a time when results are gaining particular relevance given some analysts worry about potential complacency after strong gains in 2012 have continued into the new year.
India VIX <.nifvix>, also considered by some investors as a fear gauge, is just 2.5 percent away from its all-time lowest close.
"We have already seen advance tax numbers, so in the near term one has to see how the earnings season pans out," Kaushik Dani, fund manager at Peerless Mutual Fund, said.
"One has to remain stock specific on how the numbers shape up for the quarter," Dani said.
The benchmark BSE index rose 0.1 percent, or 19.30 points, to end at 19,784.08, marking a fourth consecutive session of gains.
The index rose 1.74 percent for the week, its strongest weekly performance since the end of November.
The broader NSE index rose 0.11 percent, or 6.65 points, to end at 6,016.15, closing above the psychologically important 6,000 level for a second day. It rose 1.8 percent for the week.
Shares in upstream oil and gas companies rallied on hopes that the pricing formula recommended by a government-appointed panel that looked into oil and gas exploration contracts would be approved by the government.
The proposed changes would sharply raise the prices of domestic natural gas, analysts said.
Oil and Natural Gas Corporation shares gained 1.8 percent, while Oil India rose 2 percent.
Reliance Industries Ltd rose 0.13 percent, gaining less than its peers after the market regulator rejected its request to settle a long-pending dispute over the 2007 sale of stock futures in a unit.
State-owned oil companies gained on expectations India could soon announce a potential gradual hike in diesel prices, after a government official last month was quoted in local media saying a proposal was being considered.
Among refiners, Indian Oil Corp rose 3.5 percent, Hindustan Petroleum Corp gained 5.3 percent and Bharat Petroleum Corp ended 2.12 percent higher.
Expectations of better-than-expected quarterly earnings lifted technology stocks.
Tata Consultancy Services Ltd rose 1.45 percent, while Wipro Ltd ended up 1.5 percent higher.
Infosys, which kicks off earnings on Friday, rose 0.5 percent. The company denied a newspaper report it was planning to fire up to 5,000 poorly performing workers was "wrong", although it encourages "chronic underperformers" to leave as part of its routine staff management.
IFCI shares gained 11.4 percent after the government restructured the board of the project finance provider according to a stock filing, sparking hopes of a turnaround in operations.
However, Tata Steel ended 1.9 percent lower while Jindal Steel and Power fell 1.8 percent on profit taking, after gaining on the back of a rise in international metal prices after the end of the US "fiscal cliff" issue.

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Israeli undercover raid sets off violent protests

RAMALLAH, West Bank (AP) — Israeli undercover troops broke into a West Bank apartment building in a failed arrest raid Thursday, igniting a violent protest and signaling that Israeli-Palestinian security coordination may be in trouble, officials said.
Thursday's raid targeted a suspected Islamic militant and marked the second time this week an army operation sparked clashes. Palestinians accused Israel of taking provocative actions in retaliation for their successful bid in November to win U.N. recognition of a state of Palestine in the West Bank, Gaza and east Jerusalem, the territories Israel captured in 1967.
Israel's military denied it was walking away from coordination with the security forces of Palestinian President Mahmoud Abbas, whose self-rule government administers just over one-third of the West Bank, where more than 90 percent of the Palestinians live.
Palestinian officials said Thursday's operation began when undercover troops, followed by uniformed soldiers in more than a dozen jeeps, broke into an apartment building on the outskirts of the West Bank town of Jenin. The apparent target, an activist in the militant Islamic Jihad group, was not in the area.
The Israeli military said several hundred Palestinians began throwing stones, and that some in the crowd hurled firebombs and rolled burning tires toward the soldiers. Troops fired warning shots, and also used tear gas, stun grenades and rubber-coated steel pellets to quell the protest, the military said.
Talal Dweikat, the Palestinian governor of the Jenin district, put the number of stone throwers at several dozen. He said a Palestinian was shot in the leg and an elderly woman was bitten by an army dog. The military confirmed a woman was bitten and taken for medical treatment.
In recent years, the West Bank has been relatively calm, in part because of Israeli-Palestinian coordination in tracking Islamic militants. The coordination came in response to the 2007 takeover of Gaza by the Islamic militant Hamas, Abbas' main political rival.
Trying to prevent a similar takeover in the West Bank, Abbas began cracking down on Hamas and found his interests aligned with Israel's. Abbas has long argued that violence is counterproductive, since Palestinians are bound to lose any armed confrontation with Israel. Hamas believes Israel will make concessions only in response to force.
Security coordination with Israel is unpopular in the West Bank, especially at a time when peace talks are frozen and Palestinian independence appears unlikely anytime soon. U.N. recognition gave the Palestinians a diplomatic boost but changed little on the ground.
Palestinian officials alleged Thursday that the recent Israeli raids are part of Israel's retaliation for the statehood bid. Israel strongly opposed the U.N. recognition, saying it was an attempt to bypass negotiations.
A Palestinian security official said Abbas has ordered his security forces to avoid any confrontations with Israeli troops. Abbas is concerned about an unwanted escalation he believes will not serve Palestinian interests, said the official who spoke on condition of anonymity because he was not authorized to discuss internal deliberations with reporters.
Adnan Damiri, a spokesman for the Palestinian security forces, said Israeli troops have increasingly entered Palestinian-run areas without coordination since November. "There has been an escalation in Israeli raids into our territories since the U.N. bid," he said.
Earlier this week, another undercover raid targeting suspected Islamic Jihad militants in the West Bank prompted clashes that left 10 Palestinians wounded.
Lt. Col. Avital Leibovich, an Israeli army spokeswoman, said Israel has not abandoned security coordination with the Palestinians. "As far as we are concerned, the coordination has not changed," she said. "Our activities are in relation to threats (by militants), and nothing else.

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Israeli library unveils ancient Afghan manuscripts

JERUSALEM (AP) — A trove of ancient manuscripts in Hebrew characters rescued from caves in a Taliban stronghold in northern Afghanistan is providing the first physical evidence of a Jewish community that thrived there a thousand years ago.
On Thursday Israel's National Library unveiled the cache of recently purchased documents that run the gamut of life experiences, including biblical commentaries, personal letters and financial records.
Researchers say the "Afghan Genizah" marks the greatest such archive found since the "Cairo Genizah" was discovered in an Egyptian synagogue more than 100 years ago, a vast depository of medieval manuscripts considered to be among the most valuable collections of historical documents ever found.
Genizah, a Hebrew term that loosely translates as "storage," refers to a storeroom adjacent to a synagogue or Jewish cemetery where Hebrew-language books and papers are kept. Under Jewish law, it is forbidden to throw away writings containing the formal names of God, so they are either buried or stashed away.
The Afghan collection gives an unprecedented look into the lives of Jews in ancient Persia in the 11th century. The paper manuscripts, preserved over the centuries by the dry, shady conditions of the caves, include writings in Hebrew, Aramaic, Judea-Arabic and the unique Judeo-Persian language from that era, which was written in Hebrew letters.
"It was the Yiddish of Persian Jews," said Haggai Ben-Shammai, the library's academic director.
Holding the documents, protected by a laminated sheath, Ben-Shammai said they included mentions of distinctly Jewish names and evidence of their commercial activities along the "Silk road" connecting Europe and the East. The obscure Judeo-Persian language, along with carbon dating technology, helped verify the authenticity of the collection, he said.
"We've had many historical sources on Jewish settlements in that area," he said. "This is the first time that we have a large collection of manuscripts that represents the culture of the Jews that lived there. Until today we had nothing of this."
The documents are believed to have come from caves in the northeast region of modern-day Afghanistan, once at the outer reaches of the Persian empire. In recent years, the same caves have served as hideouts for Taliban insurgents in Afghanistan.
It remains unclear how the ancient manuscripts emerged. Ben-Shammai said the library was contacted by various antiquities dealers who got their hands on them.
Last month, the library purchased 29 out of hundreds of the documents believed to be floating around the world, after long negotiations with antiquities dealers. The library refused to say how much it paid for the collection, adding that it hoped to purchase more in the future and didn't want to drive up prices. The documents arrived in Israel last week.
Comparisons with the other find are inevitable.
The Cairo Genizah was discovered in the late 1800s in Cairo's Ben Ezra Synagogue, built in the ninth century. It included thousands of documents Jews stored there for more than 1,000 years.
Ben-Shammai said it was too early to compare the two, and it would take a long time to sift through the findings from Afghanistan. He said they were already significant since no other Hebrew writings had even been found so far from the Holy Land.
He said the Jewish community in the region at the time lived largely like others in the Muslim world, as a "tolerated minority" that was treated better than under Christian rule. Afghanistan's Jewish community numbered as many as 40,000 in the late 19th century, after Persian Jews fled forced conversion.
By the mid-20th century, only about 5,000 remained, and most emigrated after Israel's creation in 1948. A lone Jewish man remains in Afghanistan, while 25,000 Jews live in neighboring Iran — Israel's bitter enemy.
The library promises the finds will be digitized and uploaded to its website for all to see.
Aviad Stollman, curator of the library's Judaica collection, said much more would be gleaned after intense research on the papers, but already it tells a story of a previously little known community.
"First we can verify that they actually existed — that is the most important point," he said. "And of course their interests. They were not interested only in commerce and liturgy; they were interested also in the Talmud and the Bible," he said.
"They were Jews living a thousand years ago in this place. I think that is the most exciting part."

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Brotherhood official urges Egypt's Jews to return

CAIRO (AP) — A leading Muslim Brotherhood member and adviser to Islamist President Mohammed Morsi created a stir in Egypt when he called on Egyptian Jews in Israel to return home because Egypt is now a democracy and because the Jewish state won't survive.
Essam el-Erian's remarks in a TV appearance put the Brotherhood, which holds power in Egypt, on the spot as opponents — and some allies — jumped on the comments to denounce the group. Morsi's office this week disassociated the president from the comments, saying they were el-Erian's personal opinion.
The criticism ran an unusual gamut of Egyptians' attitudes toward Jews, Israel and the Brotherhood itself.
Some denounced the Brotherhood for trying to put up a veneer of tolerance by inviting Jews to return while Egypt's other religious minorities, particularly Christians, are increasingly worried about persecution under the new Islamist rulers and an Islamist-slanted constitution.
Others saw the comments as a sort of outreach to Zionists, considered the enemy, and as a new example of how the Brotherhood has had a hard time melding its longtime anti-Israeli and anti-Jewish rhetoric with its new responsibilities since coming to power. Under Morsi — who hails from the Brotherhood — the government has continued cooperation with Israel, upheld the two countries' peace deal and Morsi last month helped mediate a cease-fire between Hamas and Israel.
Some warned that el-Erian was opening the door for Egyptian Jews to demand compensation for property taken from them or left behind in Egypt and could even undermine the Palestinians' right to return to homes in Israel. Still others were simply outraged that a Brotherhood official would invite back Jews, and one hardline Islamist politician threatened any Jews who come back.
And there were a few voices calling for Egypt to sincerely look at past treatment of its Jewish community — including why they left or were expelled — and whether they should have the right to return.
Speaking on private ONTV, historian Khaled Fahmy suggested taking el-Erian's comments at face value. "I am taking the call seriously. I would like to see it in part as respectable, as addressing morals and high principles." He said Egyptians should talk about the past "harm to Egyptian Jews" and consider them as still having Egyptian nationality.
"I wish this was put to a public discussion," he said.
Egypt's once thriving Jewish community largely left Egypt more than 60 years ago amid the hostilities between Egypt and Israel. Estimates say about 65,000 Jews left Egypt since the creation of the state of Israel in 1948, most of them to Europe and the West, with a small portion settling in Israel. Their departure was fueled by rising nationalist sentiment during the Arab-Israeli wars, harassment and some direct expulsions by then-President Gamal Abdel-Nasser, and attacks on Jewish properties, some of them blamed on the Brotherhood, which renounced violence in the 1970s.
Now only a handful of Jews, mostly elderly, remain in Egypt, along with a number of heavily guarded synagogues, open only to Jews.
El-Erian, who is also deputy of the Brotherhood's political party, made his comments last week on a late night talk show on the private station Dream TV.
"I wish our Jews return to our country, so they can make room for the Palestinians to return, and Jews return to their homeland in light of the democracy" evolving in Egypt, he said. "I call on them now. Egypt is more deserving of you."
"Why stay in a racist entity, an occupation, and be tainted with war crimes that will be punished, all occupation leaders will be punished," he said. He added in separate comments that the Zionist "project" will end.
The comments didn't make much of an impact in Israel, and there was no official comment about them and little discussion of them in the press. In contrast, they raised widespread ridicule and debate in Egypt on TV shows, newspapers and social websites.
Belal Fadl, a popular Egyptian columnist and satirical writer, said the comments were hypocritical given other Brotherhood officials' statements accusing Egypt's Christians of threatening Morsi's legitimacy as president, fueling anger against the minority community.
"How can we believe the tolerance of el-Erian amid all the sectarian statements by leaders of the groups and other sheiks that all seek to chase away Egypt's Christians in the footsteps of the Jews," Fadl wrote in the daily al-Shorouk Thursday.
Youssef el-Husseini, a prominent TV presenter known for his liberal views and harsh criticism of Morsi and the Brotherhood, said el-Erian was showing a fake tolerance for Jews to impress Israel and the United States — setting aside the anti-Israel parts of his statement. El-Husseini said that if a liberal made the comments he would be branded a traitor and would be accused of inviting Zionists back to Egypt.
"Is el-Erian flirting with the Zionist state to say we are fine and you are friends," el-Husseini said on a Sunday morning talk show. "Or is he flirting with Obama" because of U.S. aid to Egypt. "Is the group taking their political garb bit by bit?"
On Tuesday, Morsi's spokesman said the presidency is not responsible for comments made by el-Erian. "These are his personal opinion," Yasser Ali, the presidential spokesman said.
Mohammed Salmawy, the head of Egypt's Writers Union, called el-Erian's comments "delirium."
"What is this superficial understanding of matters that borders naiveté?" he wrote, saying the problem of Palestinian refugees is not one of "making room" for their return.
"What the Jews who were living in Egypt want is not to return, particularly in the current circumstances. What they want is compensation for their properties" they left behind.
He said el-Erian was recognizing a right of return for Israeli Jews of Arab origin, which he said would allow for a quid-pro-quo forcing Palestinians refugees to drop their demand to return to homes in Israel so that Jews drop demands to return to Arab nations.
"It seems the way to deny the Palestinians the right of return or compensation is to exchange that right for ... the right of the return of Jewish refugees to Arab countries," he wrote Thursday.
The leading member of a former Islamic militant group, Gamaa Islamiya, which is now a political party allied to the Brotherhood, simply said Jews were not welcome back.
Quoted in the Rose el-Youssef newspaper, Tarek el-Zumor said his group will not tolerate their return "except over our dead bodies or after they change their religion and become Muslims.

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Activists: At least 9 killed by Damascus car bomb

BEIRUT (AP) — A car bomb blew up late Thursday in a Damascus gas station, killing at least nine people, a Syrian activist group said.
The Britain-based Syrian Observatory for Human Rights said the death toll in the blast in the capital's Masakin Barzeh neighborhood is expected to rise because many of the wounded were in critical condition.
Syria's state news service also reported the blast but did not give a number of dead or wounded. It said the bomb targeted cars that were lined up to get gas and blamed the attack on "terrorists," the government's shorthand for rebels seeking to topple President Bashar Assad.
The pro-regime Ikhbariyeh TV station said some 30 civilians were killed or wounded in the blast.
Despite gains in other parts of Syria by rebels seeking to topple Assad, he has largely kept his grip on the capital.
But Damascus has been targeted by a number of large bombings, many of which appear to target government buildings. Some have been claimed by the jihadist group Jabhat al-Nusra, which the U.S. has designated a terrorist organization.
There was no immediate claim of responsibility for Thursday's blast.
Masakin Barzeh is a middle-class neighborhood northeast of downtown that is home to many government employees.
The U.N. says more than 60,000 people have been killed in Syria since the start of the uprising in March 2011. The conflict has since evolved into a civil war.

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Rebel area shows limits of rebel push for Damascus

Twin airstrikes by government jets on a large, rebel-held suburb of Damascus on Thursday sheered the sides off apartment towers and left residents digging through rubble for the dead and wounded.
The bombing of Douma came amid a wave of attacks on rebellious districts of the Syrian capital, part of the government's efforts to keep rebel fighters out of President Bashar Assad's seat of power. Late Thursday, a car bomb exploded at a gas station inside the city itself, killing at least nine people, activists said.
Douma, the largest patch of rebel-held ground near Damascus, illustrates why the opposition's advance on the capital has bogged down. Despite capturing territory and setting up committees to provide basic services, the rebels lack the firepower to challenge Assad's forces and remain helpless before his air force.
That stalemate suggests the war will not end soon. The U.N. said Wednesday that more than 60,000 people have been killed since March 2011 — a figure much higher than previous opposition estimates.
Rebels took control of Douma, a suburb of some 200,000 located nine miles (15 kilometers) northwest of Damascus, in mid-October 2011, after launching attacks on military posts throughout the city, activists said.
Less than a week later, the rebels had taken over a half-dozen checkpoints and government buildings, said activist Mohammed Saeed. The army withdrew from others.
"Since then, the city has been totally liberated," he said. "There are no government troops left, but we still suffer from regime airstrikes almost every day."
Today, those entering Douma must pass through rebel checkpoints at the city's main entryways. Rebels with camouflage vests and Kalashnikov rifles zip about on motorcycles, communicating by walkie-talkie. Some belong to the security brigade, an improvised police force to catch looters that works with a judicial council of Muslim clerics and lawyers who run a prison.
In November, residents formed a civilian council to provide services for the estimated one-third of Douma's residents who have not fled the violence.
The council oversees committees for medical issues, bakeries, media relations and other tasks, said its head, Nizar Simadi. A former cleaner at city hall runs a cleanup crew that helps remove rubble from the streets after shell attacks and airstrikes.
The city's electricity went out in November — activists accuse the government of cutting it in revenge — but former electric company employees have strung in power from nearby areas still on the government network, returning power to some of the city.
Douma has more than a dozen rebel brigades, and the city's fighters have joined battles in many other areas around the capital. Most of their support comes from wealthy Syrians abroad who send money to buy arms, said the head of one rebel brigade, the Douma Martyrs, who goes by the name Abu Waleed.
In November, Douma's fighters raided two army bases in the nearby suburb of Otaya, he said, making away with arms that helped them push closer to Damascus. But they can do little about the government's airstrikes.
Rebel forces are currently fighting the government in areas on three sides of the capital. They are closest in the south, where they have pushed into the poor Damascus neighborhood of Hajar al-Aswad. Recent weeks have also seen fierce clashes in the southwestern suburb of Daraya, which the government says it is close to reclaiming.
During Thursday's airstrikes on Douma, a government fighter jet launched two bombing runs on a densely populated residential area near a prominent mosque, said Saeed, the activist.
Videos posted online showed residents rushing though a smoke-filled street and loading wounded people into cars and pickup trucks. One man was buried up to his thigh in debris and helped rescuers dig himself out. Another man emerged from a pile of rubble with blood on his face and covered head-to-toe in gray cement dust.
One group provided videos of 12 people they said were killed in the attack. The videos appeared genuine and corresponded to other AP reporting on the strike.
The Britain-based Syrian Observatory for Human Rights said at least 10 rebel fighters and 32 civilians were killed Thursday in clashes, shelling and airstrikes in the Damascus Countryside province that surrounds the capital, more than anywhere else in Syria.
Late Thursday, a car bomb exploded at a gas station inside the city itself, killing at least nine people, activists said. Syria's state news agency blamed the attack on "terrorists," its shorthand for the rebels, but did not give numbers for the dead and wounded. There was no immediate claim of responsibility.
Despite rebel advances near Damascus, it remains unclear whether they'll be able to turn the tables on Assad's forces. Rebels launched a hasty offensive on Damascus last summer but were swiftly routed by government forces.
Before attempting to take Damascus again, Saeed said the rebels must gather enough ammunition to sustain the battle, take over nearby army bases to prevent attacks from behind and increase coordination between rebel brigades.
He guessed that could take six months.
The Syrian government has not commented on the fall of Douma to rebels, whom it characterizes as terrorists backed by foreign powers seeking to destroy the country.
The chief of staff of Syria's armed forces called on the army to continue its "holy and national task to crush the armed terrorist groups and their hideout," the state news agency reported.
Gen. Abdullah Ayoub said the "conspiracy" against Syria would fail "thanks to the bravery of the Syrian army and the coherence of the Syrian people."
Activists reported clashes in a number of other parts of Syria on Thursday, including inside the Taftanaz helicopter base in the north.
In Jordan, the U.N. refugee agency said that around 1,200 people have fled across Syria's southern border each day for the past three days, an increase reflecting fresh violence in the south. UNHCR reporting officer Danita Topcagic said many shops in the area were shut, making it hard for people to find food, and that electricity and water supplies were short.
About a half-million Syrians have sought refuge from the war in neighboring countries, and many more are displaced inside Syria.
Meanwhile, the parents of an American journalist who has been missing in Syria since he was kidnapped Nov. 22 appealed to his captors for compassion and any information about their son's health and welfare. Thirty-nine-year-old James Foley was in the country contributing videos to Agence France-Press, which has vowed to help secure his release.
Twenty-eight journalists were killed in Syria in 2012, prompting the Committee to Protect Journalists to name Syria the most dangerous country in the world to work in last year.

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Fiscal-cliff deal no recipe for a robust economy

Housing is rebounding. Families are shrinking debts. Europe has avoided a financial crackup. And the fiscal cliff deal has removed the most urgent threat to the U.S. economy.
So why don't economists foresee stronger growth and hiring in 2013?
Part of the answer is what Congress' agreement did (raise Social Security taxes for most of us). And part is what it didn't do (prevent the likelihood of more growth-killing political standoffs).
By delaying painful decisions on spending cuts, the deal assures more confrontation and uncertainty, especially because Congress must reach agreement later this winter to raise the government's debt limit. Many businesses are likely to remain wary of expanding or hiring in the meantime.
One hopeful consensus: If all the budgetary uncertainty can be resolved within the next few months, economists expect growth to pick up in the second half of 2013.
"We are in a better place than we were a couple of days ago," Chad Moutray, chief economist for the National Association of Manufacturers, said a day after Congress sent President Barack Obama legislation to avoid sharp income tax increases and government spending cuts. But "we really haven't dealt with the debt ceiling or tax reform or entitlement spending."
Five full years after the Great Recession began, the U.S. economy is still struggling to accelerate. Many economists think it will grow a meager 2 percent or less this year, down from 2.2 percent in 2012. The unemployment rate remains a high 7.7 percent. Few expect it to drop much this year.
Yet in some ways, the economy has been building strength. Corporations have cut costs and have amassed a near-record $1.7 trillion in cash. Home sales and prices have been rising consistently, along with construction. Hiring gains have been modest but steady. Auto sales in 2012 were the best in five years. The just-ended holiday shopping season was decent.
Bernard Baumohl, chief global economist for the Economic Outlook Group, thinks the lack of finality in the budget fight is slowing an otherwise fundamentally sound economy.
"What a shame," Baumohl said in a research note Wednesday. "Companies are eager to ramp up capital investments and boost hiring. Households are prepared to unleash five years of pent-up demand."
The economy might be growing at a 3 percent annual rate if not for the threat of sudden and severe spending cuts and tax increases, along with the haziness surrounding the budget standoff, says Ethan Harris, co-director of global economics at Bank of America Merrill Lynch.
Still, Congress' deal delivered a walloping tax hike for most workers: the end of a two-year Social Security tax cut. The tax is rising back up to 6.2 percent from 4.2 percent. The increase will cost someone making $50,000 about $1,000 a year and a household with two high-paid workers up to $4,500.
Mark Zandi, chief economist at Moody's Analytics, calculates that the higher Social Security tax will slow growth by 0.6 percentage point in 2013. The other tax increases — including higher taxes on household incomes above $450,000 a year — will slice just 0.15 percentage point from growth, Zandi says.
Congress' deal also postpones decisions on spending cuts for military and domestic programs, including Medicare and Social Security. In doing so, it sets up a much bigger showdown over raising the government's borrowing limit. Republicans will likely demand deep spending cuts as the price of raising the debt limit. A similar standoff in 2011 brought the government to the brink of default and led Standard & Poor's to yank its top AAA rating on long-term U.S. debt.
Here's how key parts of the economy are shaping up for 2013:
— JOBS
With further fights looming over taxes and spending, many companies aren't likely to step up hiring. Congress and the White House will likely start battling over raising the $16.4 trillion debt limit in February.
Many economists expect employers to add an average of 150,000 to 175,000 jobs a month in 2013, about the same pace as in 2011 and 2012. That level is too weak to quickly reduce unemployment.
The roughly 2 million jobs Zandi estimates employers will add this year would be slightly more than the 1.8 million likely added in 2012. Zandi thinks employers would add an additional 600,000 jobs this year if not for the measures agreed to in the fiscal cliff deal.
Federal Reserve policymakers have forecast that the unemployment rate will fall to 7.4 percent, at best, by year's end. Economists regard a "normal" rate as 6 percent or less.
— CONSUMER SPENDING
Consumer confidence fell in December as Americans began to fear the higher taxes threatened by the fiscal cliff. Confidence had reached a five-year high in November, fueled by slowly declining unemployment and a steady housing rebound. Consumer spending is the driving force of the economy.
But the deal to avoid the cliff won't necessarily ignite a burst of spending. Taxes will still rise for nearly 80 percent of working Americans because of the higher Social Security tax rate.
Since the recession officially ended in June 2009, pay has barely kept up with inflation. The Social Security tax increase will cut paychecks further. And with the job market likely to remain tight, few companies have much incentive to hand out raises.
Thanks to record-low interest rates, consumers have whittled their debts to about 113 percent of their after-tax income. That's the lowest share since mid-2003, according to Haver Analytics. And the delinquency rate for users of bank credit cards is at an 18-year low, the American Bankers Association reported Thursday.
Yet that hardly means people are ready to reverse course and ramp up credit-card purchases. Most new spending would have to come from higher incomes, says Ellen Zentner, senior economist at Nomura Securities.
"We don't see the mindset of, 'Let's run up the credit card again,'" she says.
— HOUSING
Economists are nearly unanimous about one thing: The housing market will keep improving.
That's partly because of a fact that's caught many by surprise: Five years after the housing bust left a glut of homes in many areas, the nation doesn't have enough houses. Only 149,000 new homes were for sale at the end of November, the government has reported. That's just above the 143,000 in August, the lowest total on records dating to 1963. And the supply of previously occupied homes for sale is at an 11-year low.
"We need to start building again," says Patrick Newport, an economist at IHS Global Insight.
Sales of new homes in November reached their highest annual pace in 2½ years. They were 15 percent higher than a year earlier. And October marked a fifth straight month of year-over-year price increases in the 20 major cities covered by the Standard & Poor's/Case-Shiller national home price index.
Potential homebuyers "are more likely to buy, and banks are more likely to lend" when prices are rising, says James O'Sullivan, chief U.S. economist at High Frequency Economics. "It feeds on itself."
Higher prices are also encouraging builders to begin work on more homes. They were on track last year to start construction of the most homes in four years.
Ultra-low mortgage rates have helped spur demand. The average rate on the U.S. 30-year fixed mortgage is 3.35 percent, barely above the 3.31 percent reached in November, the lowest on records dating to 1971.
Housing tends to have an outside impact on the economy. A housing recovery boosts construction jobs and encourages more spending on furniture and appliances. And higher home prices make people feel wealthier, which can also lead to more spending.
"When you have a housing recovery, it's nearly impossible for the U.S. economy to slip into recession," Zentner says.
— MANUFACTURING
Factories appear to be recovering slowly from a slump last fall. The Institute for Supply Management's index of manufacturing activity rose last month from November. And a measure of employment suggested that manufacturers stepped up hiring in December. Factories had cut jobs in three of the four months through November, according to government data.
Another encouraging sign: Americans are expected to buy more cars this year. That would help boost manufacturing output. Auto sales will likely rise nearly 7 percent in 2013 over last year to 15.3 million, according to the Polk research firm. Sales likely reached 14.5 million last year, the best since 2007. In 2009, sales were just 10.4 million, the fewest in more than 30 years.
And if Congress can raise the federal borrowing limit without a fight that damages confidence, companies might boost spending on computers, industrial machinery and other equipment in the second half of 2013, economists say. That would help keep factories busy.

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