Employers added a tepid 74,000 jobs in December, the Labor Department said Friday in a report that fell far short of expectations and suggested that 2013 was a ho-hum year for American workers.
Mainstream economists had expected a December number north of 200,000, based on other economic indicators that point to an accelerating growth rate. So Friday’s number was a huge miss, and initial reaction from economists suggested December’s weak showing was an aberration that’ll be revised upward next month.
The unemployment rate fell sharply to 6.7 percent in December, though that was because of people giving up the job search, not people finding work.
“I wouldn’t pay any attention to the (Friday) numbers. It is not consistent with any other data,” Mark Zandi, the chief economist for forecaster Moody’s Analytics, told McClatchy. “The reality is the economy is creating 200,000 jobs per month. At this pace of job growth, unemployment will decline by half a percentage point this year.”
Zandi’s confidence is partly due to Wednesday’s ADP National Employment Report, a private-sector gauge of hires excluding government. It showed 238,000 jobs created last month. And first-time claims for unemployment benefits, another important workforce indicator, improved again this week, as did their four-week average.
“Bottom line: I think the economy and job market have shifted into a higher gear, and that will become evident in the next few months,” Zandi said.
Others speculated that the weather had frustrated hiring.
“When a data release comes in so far away from expectations and doesn’t line up with other labor-market indicators, there is a good possibility this is just a one-shot deal that could either get revised away or made up for in next month’s release,” said Scott Anderson, the chief economist for San Francisco-based Bank of the West. “Bad weather was likely a major factor in the disappointing job gains for December.”
Friday’s job report closed the books on 2013, save for revisions in next month’s report. Despite the growing optimism about 2014, hiring for last year averaged 182,000 a month, slightly above the 150,000 needed to keep pace with new entrants into the workforce while knocking down the jobless rate. The 2013 average is down slightly from the 2012 average of 183,000. It means 2013 was a year of economic muddling along.
The Obama administration put on a brave face Friday.
“Though December’s job growth was less than expected, we continue to focus on the longer-term trend in the economy: 2.2 million private-sector jobs added and a 1.2 percentage point decline in the unemployment rate over the course of 2013,” said Jason Furman, the head of the White House Council of Economic Advisers.
“Every American has a right to ask the question ‘Where are the jobs?’ Today’s disappointing report shows, once again, that the president’s policies are failing too many Americans, many of whom have simply stopped looking for work,” said House Speaker John Boehner, R-Ohio.
The sharp fall in the unemployment rate helps explains why Federal Reserve Chairman Ben Bernanke changed gears in December and said a 6.5 percent jobless rate no longer would be the threshold by which the Fed might begin raising its benchmark lending rate, which has been near zero since December 2008.
The Fed, he said, will look at a broad range of indicators in the economy to determine when it’s healthy enough to support higher lending rates. The Fed this month began tapering back its unconventional purchase of mortgage and government bonds, which is designed to spark economic activity. If January hiring comes in weak, it may lead the Fed to maintain those purchases rather than wean the economy off of them.
New hiring didn’t appear to drive the jobless-rate drop. The household survey, on which the unemployment rate is based, showed that 347,000 workers left the labor force last month. It’s why the labor-force participation rate, which reflects the percentage of working-age Americans who are employed or are looking for work, fell to 62.8 percent, a 35-year low.
“It is difficult to determine how much of this report is ‘signal’ and how much is ‘noise,’ ” said Paul Edelstein, the director of financial economics for forecaster IHS Global Insight. “If the normal number of workers were unable to work due to weather, the jobs count could have been closer to 200,000. Yet this doesn’t fully explain the loss of 347,000 workers from the labor force.”
Some 273,000 workers reported in the household survey that weather had kept them from working.
“This is up from an historical December average of 138,000. The details suggested that weather certainly played a role, as construction jobs fell by 16,000 while transportation shed 1,000,” Edelstein said.
The construction sector showed a paltry gain of 10,000 jobs per month for all of 2013.
“Given the variability of weather, especially in winter, the downturn in December is not cause for alarm,” cautioned Ken Simonson, the chief economist for The Associated General Contractors of America. “The data does show how uneven the recovery remains, with residential construction doing very well but the public sector remains weak and private nonresidential construction is mixed.”
Manufacturing, a labor-intensive sector, added 9,000 jobs last month and averaged 77,000 per month last year. That’s half of the average 154,000 jobs per month in 2012.
2013 “was the weakest year of hiring growth in the sector since 2009,” said Chad Moutray, the chief economist of the National Association of Manufacturers.
In his blog Shopfloor.org, Moutray said the December employment data “show that we continue to have persistent weaknesses in the labor market despite recent progress. Weather might have been a factor, but overall the jobs market data were disappointing.”
Retailers enjoyed strong hiring in December, a historically good month because of the holidays. Retailers added 55,000 jobs last month, but they averaged a tamer 32,000 per month over the year.
“The shortened holiday calendar and severe weather in many parts of the country certainly impacted these figures, but I suspect we will see upward revisions in the coming months,” said Jack Kleinhenz, the chief economist for the National Retail Federation, adding that “the economy seems primed for growth.”
The professional and business services sector, reflecting better-paying white-collar jobs, added a lukewarm 19,000 jobs in December but had a stronger average of 53,000 jobs per month over the year.
The usually robust health care sector lost 6,000 jobs in December and averaged 17,000 new jobs per month in 2013, down from 27,000 per month in 2012.