US economy adds paltry 74,000 jobs, but jobless rate drops to 6.7% in December
- POSTED: 10 Jan 2014 23:55
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The US added a paltry 74,000 jobs in December, in a slowdown in employment creation that put pause to hopes that the economy has moved into higher gear.
WASHINGTON: The US added a paltry 74,000 jobs in December, in a slowdown in employment creation that put pause to hopes that the economy has moved into higher gear.
The Labor Department data released on Friday was far below the 197,000 jobs economists had expected, and less than half the monthly average of the past 12 months.
While some analysts said a spate of harsh weather in parts of the country likely depressed hiring -- construction jobs fell, for example, despite the rebound in the housing industry -- others said the data was a signal to be cautious about optimistic forecasts.
The unemployment rate fell sharply from 7.0 per cent to 6.7 per cent, the lowest level since October 2008.
But that normally good news was largely explained by nearly 350,000 people dropping out of the workforce, rather than getting jobs.
"Clearly this latest news raises some uncertainty" about economic growth, said Paul Edelstein at IHS Global Insight.
The news threw expectations about the Federal Reserve's just-launched program of cutting back its stimulus into question. US bond yields and the dollar fell on expectations that the Fed could slow its monetary tightening timeline.
"Ultimately, the uncertainty surrounding the jobs market raises the possibility that the Fed might forego another taper move at its next meeting later this month," Edelstein said.
"Instead, the Fed might choose to wait for another data point on the jobs market to see if December was an aberration."
The news also added to the fight in Congress over whether the government needs to spend more to create jobs and support the jobless.
On Thursday, Senate Democrats proposed legislation to restore long-term jobless benefits to people who lost them at the end of the year.
Jason Furman, the chairman of the White House Council of Economic Advisors, said the numbers are a reminder of the challenge especially of dealing with long-term unemployment.
"Despite an abundance of evidence indicating that this challenge is far from solved, Congress allowed extended unemployment insurance to lapse at the end of 2013, cutting off a critical lifeline to those who lost a job through no fault of their own and are still searching for work," he said in a statement.
"While we are making progress, extended unemployment insurance benefits remain necessary and should be the first order of business in 2014."
But John Boehner, Speaker of the House of Representatives, countered that the data shows that President Barack Obama's policies "are failing too many Americans, many of whom have simply stopped looking for work."
Surprised by both the job creation and unemployment rate figures, many analysts said they were deceiving and that updates and revisions over the next few months were likely to show a better picture.
Seemingly contradictory, the two key figures come from different surveys -- jobs growth from business and official establishments and the jobless rate from household data, explaining some of the discrepancy.
In the establishment data, private firms generated a net 87,000 jobs last month, largely in the retail trade and temporary jobs, with a drop in construction jobs paralleling bad weather in many parts of the country.
Meanwhile government jobs at all levels fell a net 13,000.
And at the same time, the numbers for average weekly wages and hours worked generally softened
The household survey showed a larger rise in new employment, but the main change was the fall in the size of the labour force.
"The drop was almost entirely due to people leaving the labour force as the number of people reported employed in December only rose by 143,000, just enough to keep the employment-to-population ratio constant," said economist Dean Baker of the Center for Economic and Policy Research.
The same data showed a fall in the labour force participation rate, to an extremely low 62.8 per cent, far below the 66 per cent-plus levels seen before the 2008 financial crisis.
Ian Shepherdson of Pantheon Macroeconomics cautioned not to put too much weight on the numbers for one month, which he said could eventually be sharply revised.
"The payroll numbers are the wildest of wild cards in recent memory and make no sense in the context of all the other labor market data," he said in a client note.
"Weather effects may account for some or even all the shortfall," he added.