The surprisingly weak job growth figures reported by the Labor
Department on Friday, however, could cause some discomfort at the
Federal Reserve, which last month announced plans to scale back its
massive monetary stimulus program.
Nonfarm payrolls rose only 74,000 in December, the smallest increase
since January 2011 and well short of the 200,000 jobs or so that
most economists had expected.
While the unemployment rate fell 0.3 percentage point to 6.7
percent, its lowest level since October 2008, the decline mostly
reflected people leaving the labor force.
Michael Feroli, an economist with JPMorgan Chase in New York, called
the report "an ugly mix" but said: "We'd guess the underlying trend
in job growth hasn't materially shifted."
U.S. stock prices were little changed, but yields on benchmark
Treasury debt fell by the most since October. The U.S. dollar
slipped against other currencies as traders bet economic weakness
would further delay any eventual increase in interest rates by the
The step back in hiring was at odds with other indicators that have
painted an upbeat picture of the jobs market.
Tempering the blow, the government's survey of employers found
38,000 more jobs were added in November than previously reported.
For all of 2013, the economy created 2.2 million jobs.
Construction employment fell last month for the first time since May
and leisure and hospitality payrolls rose only marginally, providing
hints that extremely cold weather in some parts of the country had
held back hiring.
In addition, transportation payrolls recorded their first decline in
five months, and the average workweek for all workers slipped by a
tenth of an hour to 34.4 hours.
The smaller survey of households from which the jobless rate is
derived showed 273,000 people stayed at home because of the bad
weather, the most since 1977 and well above the 100,000 average for
the month of December.
Economists said the cold weather may have dampened job growth by as
much as 100,000 last month.
"We do not think that the disappointing December payroll number
marks the beginning of a renewed downward trend," said Harm Bandholz,
chief U.S. economist at UniCredit Research in New York. "We continue
to expect nonfarm payrolls will accelerate towards 200,000 to
225,000 in the course of this year."
The labor force participation rate, or the proportion of working-age
Americans who have a job or are looking for one, fell 0.2 percentage
point to 62.8 percent, returning to the more than 35-year low hit in
The decline, which may have partly reflected end-of-year
retirements, accounted for two-thirds of the drop in the jobless
rate, although a gauge of employment in the household survey also
FED SEEN HOLDING COURSE
The report offered a cautionary note after a string of data — from
consumer spending and trade to industrial production — that had
suggested the economy ended 2013 on strong footing and was
positioned to strengthen further this year.
Other data on Friday showed wholesale inventories rose more than
expected in November, leading some economists to upgrade their
forecasts for fourth-quarter growth.
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GDP growth this year is expected to top 3 percent, a sharp
acceleration from the 1.7 percent forecast for 2013.
In a sign of growing confidence in the economy's prospects, the Fed
announced in December that it would trim its monthly bond purchases
to $75 billion from $85 billion.
Despite the weaker-than-expected jobs data, most economists held to
the view that the Fed would enact a further, similar-sized cut at
its next meeting on January 28-29.
Fifty-seven of 61 economists polled by Reuters after the report said
they expected the U.S. central bank to trim its purchases by $10
billion at each of its meetings this year.
"I don't think the Fed is going to change its mind," said Bill
Cheney, chief economist at John Hancock Financial Services in
Boston. "The trend, in a broad sense, still looks quite favorable."
Indeed, two Fed officials, St. Louis Fed President James Bullard and
Richmond Fed chief Jeffrey Lacker, suggested as much. "I would be
disinclined to react to one month's number," Bullard said. "For now
we're on a program where we're likely to continue to taper (asset
purchases) at subsequent meetings.
NOT ALL WEATHER
The private sector accounted for all the gains in employment last
month, with government payrolls falling 13,000 after rising 15,000
Manufacturing employment rose 9,000. While that represented a fifth
straight month of gains, it marked a slowdown from November's hefty
31,000 count. The number of construction jobs fell 16,000, snapping
six consecutive monthly increases.
Utilities jobs fell by the most in a year.
Not all the job losses could be blamed on the weather. The
information sector shed 12,000 positions and healthcare employment
fell for only the second time since 1990.
Employment in the retail sector accelerated after slowing in
November. There were also payroll gains in professional and business
Average hourly earnings rose two cents. Over the past 12 months,
hourly earnings have risen only 1.8 percent, a sign the tepid wage
gains that have characterized the U.S. economic recovery continue.
(Reporting by Lucia Mutikani; editing by
Andrea Ricci, Tim Ahmann and Paul Simao)
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