Analysts expect the Social Security tax increase to shave about a half-point off economic growth in 2013, because consumers drive about 70 percent of economic activity.
The hit to consumers is coming at a precarious time. The economy contracted in the fourth quarter of 2012 for the first time in 3½ years. The drop was due mainly to a steep cut in defense spending and declining exports. Most analysts think those factors will prove temporary and that the economy will grow this quarter and the rest of the year.
Friday's report did serve as a reminder that unemployment has been stuck at 7.8 percent or more since September. The rate would be even higher if many Americans hadn't retired or stopped looking for work. The proportion of the adult population that is working or looking for work is near a 32-year low. If labor force participation were still at its prerecession level, unemployment could exceed 11 percent.
And despite the consistent hiring gains, the job market has a long way to go to fully heal from the recession. Between January 2008 and February 2010, the United States lost 8.7 million jobs. Since then, it's regained 5.5 million — 63 percent of the lost jobs.
"We are still in a crisis-level jobs hole," says Heidi Shierholz, an economist with the liberal Economic Policy Institute.
Long-term unemployment remains a chronic problem. About 4.7 million people have been out of work for six months or more. That's down 15 percent in the past year. But it's still much higher than it's ever been after previous recessions.
Among the long-term unemployed is Will Nielsen, who has struggled to find work for more than a year. He worked as a contractor doing graphic design and video production for a startup company that went bust in December 2011.
The job search has been frustrating: Most of the jobs he's seen advertised are part-time or freelance. Permanent jobs with salaries and benefits seem to him nonexistent.
Contractors aren't eligible for unemployment benefits, so he's been relying on his girlfriend's salary, which has "strained" their relationship.
Nielsen, 37, who lives in Santa Rosa, Calif., applied last month for an electrician's apprenticeship program that would pay a stipend while he learned a new trade. But when he arrived at the training center to submit his application, at least 20 people were there ahead of him.
"It looked like the Great Depression," he said.
Yet the burst of hiring at the end of 2012 has raised hopes that the recovery from the Great Recession is finally strengthening.
"This could be a breakout year for the economy," Bernard Baumohl, chief global economist at the Economic Outlook Group, wrote in a note to clients. "The economy, sales, employment and the stock market are all higher in spite of the bickering and rancor in Washington."
Kaltura, a New York-based online video software company, plans to hire 100 people in 2013, which would bring their staff to 300. The company has 17 open jobs.
Company President Michal Tsur said Kaltura has managed to benefit from the sluggish economy: Companies use its software to post training videos online, reducing the cost of training. Universities are also pushing online video courses to reach more students.
Entertainment companies like HBO are using Kaltura's software to post videos on YouTube, Facebook and on the websites of video providers like Verizon.
Even with high unemployment, Tsur said, it's hard to find the software engineers, sales people and programmers Kaltura needs.
"If we stumble upon superstars," she said, "we'll hire them immediately."