Thursday, July 10, 2014
Inquirer Daily News

Hiring hit the brakes in Dec.

Employers added 74,000 jobs, fewer than forecast. Yet the jobless rate fell: Many stopped looking.

WASHINGTON - Friday's jobs report from the Department of Labor came as a shock. The news - that U.S. employers added just 74,000 jobs in December - was unanticipated from an economy that had been adding nearly three times as many jobs for four straight months.

Indeed, job growth was a key reason the Federal Reserve decided last month to slow its economic stimulus.

So what happened in December? Economists struggled for explanations: Unusually cold weather. A statistical quirk. A temporary halt in steady job growth.

Blurring the picture, a wave of Americans stopped looking for work, meaning they were no longer counted as unemployed. Their exodus cut the unemployment rate from 7 percent to 6.7 percent - its lowest point in more than five years.

Friday's weak report was particularly surprising because it followed a flurry of data that had pointed to a robust economy: U.S. companies are selling record levels of goods overseas. Americans are spending more on big purchases such as cars and appliances. Layoffs have dwindled. Consumer confidence is up, and debt levels are down. Builders broke ground in November on the most new homes in five years.

"The disappointing jobs report flies in the face of most recent economic data, which are pointing to a pretty strong fourth quarter," said Sal Guatieri, an economist at BMO Capital Markets.

On Wall Street, investors mostly shrugged off the report, apparently concluding that it was an aberration given the recent positive economic signs.

The Standard & Poor's 500 index closed up 4.24 points, or 0.23 percent, at 1,842.37. The Dow Jones industrial edged down 7.71 points, just 0.05 percent, to 16,437.05. The Nasdaq composite rose 18.47 points, or 0.44 percent, at 4,174.66.

It's unclear whether the sharp hiring slowdown might lead the Federal Reserve to rethink its plan to slow stimulus efforts. The Fed decided last month to pare its monthly bond purchases, which have been designed to lower interest rates to spur borrowing and spending.

Janet Yellen, who takes over next month as Fed chair, "is probably scratching her head looking at the report," said Sun Wong Sohn, an economics professor at the University of California's Smith Business School.

Certainly many economists were. Some predicted that the jobs gain would be revised upward in the coming months. The government adjusts each month's jobs figure in the following two months as additional companies respond to its survey.

Cold weather affected the report in several ways. Construction companies, which stop work during bad weather, cut 16,000 jobs, the most in 20 months. And the average workweek dipped as more people worked part time. An unusually large number of people missed work in December because of the weather, the government's surveys found.

Michael Hanson, an economist at Bank of America Merrill Lynch, estimated that all told, the cold weather lowered hiring by about 75,000 jobs.

Mark Vitner of Wells Fargo noted that several industries reported unusually steep job losses. Accounting and bookkeeping services, for example, lost 24,700 jobs, the most in nearly 11 years. Performing arts and spectator sports cut 11,600, the most in 21/2 years. The movie industry shed 13,700 jobs.

Health care cut 6,000 positions, the sector's first monthly drop in 10 years.

"We should expect to see at least one fluky employment report each year," Vitner said. "December's ... was likely that report."

As surprising as the weak job growth was the stream of people who stopped job-hunting. The proportion of those either working or looking for work fell to 62.8 percent, matching a nearly 36-year low.

Last month's expiration of extended benefits for 1.3 million long-term unemployed could accelerate that trend - beneficiaries had been required to look for work to receive unemployment checks.

Christopher S. Rugaber Associated Press
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