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.
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.