Will Economy Weather the Weather, Another Bad Jobs Report?

McClatchy Washington BureauFebruary 7, 2014 

At the Herr Foods Inc. plant in Nottingham, Pa., an employee cleans machines as newly flavored potato chips slide down.

BRYAN LOWRY — Medill News Service/MCT


    • Professional and business services, up 36,000
    • Manufacturing, up 21,000
    • Leisure and hospitality up 24,000
    • Health care, unchanged
    • Construction, up 48,000
    • Temporary help services, up 8,100
    • Transportation and warehousing, up 9,900
    • Retail, down 12,900
    • Financial services, down 2,000
    • Government jobs, down 29,000

Bad weather and continued cuts in government employment appeared to weigh on hiring in January, with employers adding just 113,000 jobs after dismal hiring in December, the government said in a report Friday.

Coming on top of softening economic data and sluggish car sales, the January jobs report from the Labor Department is sure to renew concerns that for a third straight year, forecasts for stronger growth may prove wrong.

Mainstream economists had expected January payrolls to grow by 175,000, so January's number was a second straight big miss. Friday’s report revised up December's dismal 74,000 jobs number by just 1,000 positions.

In a year with mid-term elections, every jobs report in 2014 will be viewed through a political prism in Washington. It took House Speaker John Boehner, R-Ohio, just 13 minutes to attack Friday’s jobs report.

"The American people continue to ask 'where are the jobs?' and the president clearly has no answers," Boehner said.

While most economists blamed weather for the weak number, Jason Furman, chairman of the White House Council of Economic Advisers, did not.

“I don’t think weather had a lot to do with the January jobs report,” he said on CNBC television, noting he put more weight on California’s brutal drought than the cold spell. “I don’t think it was a particularly big part of the story in the jobs numbers this month.”

In his White House blog, Furman focused on the longer view.

“Private sector job growth was revised up for November (to 272,000) and December (to 89,000) so that over the past twelve months, private employment has risen by 2.3 million, or an average of 191,000 per month,” he said.

The sluggish hiring in December and January came at a pace that, if continued, would be well below what’s needed to keep up with new entrants into the workforce and bring down the jobless rate.

 Yet the unemployment rate dipped a tenth of a percentage point to 6.6 percent in January.

“The best news in the report is that unemployment declined again, and this time it happened because of more jobs and not a weaker labor force,” Mark Zandi, chief economist for Moody’s Analytics, told McClatchy, noting the labor force participation rate actually inched up slightly. “The expiration of the unemployment insurance program (in December) does not appear to have had much of an impact in January.”

That’s a reference to the loss of benefits for about a third of the long-term unemployed. A bill to extend these benefits anew fell one Senate vote short of clearing a procedural hurdle Thursday on Republican opposition. If benefits aren’t extended, said Zandi, it will show up the labor force numbers later in the springtime.

The number of long-term unemployed in January stood at 3.6 million, or about 35.8 percent of all the unemployed. That number fell by 1.1 million since January 2012, the Labor Department said.

Economists blamed the rough weather nationwide in January for the weak report, especially for weak car sales as sales lots in much of the nation were packed with snow.

In a conference call with reporters Thursday, Matthew Shay, president of the National Retail Federation, warned the nationwide cold snap is expected to freeze retail sales for the first couple of months of 2014.

Despite the poor weather the construction led all job gainers, adding 48,000 in January, and manufacturers added another 21,000.

“Manufacturers have noted a pickup in demand and production over the past six months, which have led to increase in hiring overall,” Chad Moutray, chief economist for the National Association of Manufactures, said. “Manufacturers have reflected cautious optimism for 2014, and the 15,000 additional workers added each month since July highlights much of this positivity.”

Many economists think the bad weather masked underlying strength in the economy.

“Bad winter weather is weighing heavily on the job market.  Fewer people are working, and many have had their hours cut back due to the severe cold and fierce storms,” said Zandi. “The impact of the bad weather is clearest in retail, educational services, local government, and transportation.”

Indeed, government hiring weighed against the broader jobs numbers in January. The sector subtracted 29,000 jobs for the month, almost half of those non-postal federal jobs. Local governments also shaved 11,000 posts from their payrolls in January.

“Weakness is coming from services and government payrolls,” Scott Anderson, chief economist for San Francisco-based Bank of the West, told McClatchy, adding that other gauges of the services sector aren’t showing weakness “so the slowdown in job gains in the private services sector is suspicious and likely being impacted by the weather.”

The weak Friday report “doesn’t alter my view on the economic outlook” for 2014, he said, or the ongoing pullback in the Federal Reserve’s bond purchases in support of the economy.

The new Fed chair, Janet Yellen, goes before Congress next week for the first time since taking the helm. Two straight months of weak hiring are sure to prompt questions about whether she’ll take a pause in the tapering back of the purchases.


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