Economists and the stock market shrugged off the second consecutive dismal jobs report Friday, attributing it to temporary factors and expressing confidence in underlying economic strength.
Mainstream economists had expected January payrolls to grow by 175,000, so January’s 113,000 reported by the Bureau of Labor Statistics constituted a second straight big miss. Friday’s report also revised up December’s dismal 74,000 jobs number by just 1,000 positions, suggesting the weak showing wasn’t a fluke. The unemployment rate decreased to 6.6 percent.
Bad weather got the blame for a weak January, and economists seemed to think the economy is stronger than the labor market suggests.
“The impact of the bad weather is clearest in retail, educational services, local government and transportation,” Mark Zandi, chief economist of Moody’s Analytics, told McClatchy. “The job market will get back on track once more normal weather returns. Nothing fundamental has changed in the economy to suggest that the job market has throttled back.”
The stock market seemed to agree. Stocks opened up and stayed there all day. The Dow Jones industrial average closed up 165.55 points to 15794.08. The S&P 500 gained 23.59 points to 1797.02, and the NASDAQ finished up 68.74 points to 4125.86.
On Capitol Hill, however, Republicans were quick to pounce on the bad jobs numbers.
“The American people continue to ask, ‘Where are the jobs?’ and the president clearly has no answers,” said House Speaker John Boehner, R-Ohio.
Jason Furman, chairman of the White House Council of Economic Advisers, did not blame cold weather.
“I don’t think weather had a lot to do with the January jobs report,” he said on CNBC, 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 12 months, private employment has risen by 2.3 million, or an average of 191,000 per month,” he said.
Two straight soft months on hiring prompted questions of whether the Federal Reserve under new chair Janet Yellen might take a pause after tapering back on controversial bond purchases in both January and February. Yellen goes before Congress on Tuesday, the first time since taking the helm on Feb. 1.
“We expect Fed Chair Yellen to stay the course at her testimony next week, reiterating her view that the economy is healing, allowing for a measured pace of tapering,” said Michelle Meyer, a top economist at Bank of America Merrill Lynch.
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 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,” said Zandi, 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, he said, it will show up in the labor force numbers later in the spring.
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.
In a conference call with reporters Thursday, Matthew Shay, president of the National Retail Federation, warned that the nationwide cold snap is expected to freeze retail sales for the first couple of months of 2014. The sector shed about 13,000 jobs in January.
Despite the poor weather, construction led all job gainers, adding 48,000 in January. Manufacturers added another 21,000.
“Manufacturers have noted a pickup in demand and production over the past six months, which have led to an increase in hiring overall,” said Chad Moutray, chief economist for the National Association of Manufacturers. “Manufacturers have reflected cautious optimism for 2014, and the 15,000 additional workers added each month since July highlights much of this positivity.”
Government again subtracted from the overall number, reducing 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.”