Weak jobs report puzzles economists

  • Associated Press
  • Friday, January 10, 2014 4:48pm
  • Business

WASHINGTON — It came as a shock: U.S. employers added just 74,000 jobs in December, far fewer than anyone expected. This from an economy that had been adding nearly three times as many for four straight months — 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 from the Labor Department 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 like 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.

It’s unclear whether the sharp hiring slowdown might lead the Federal Reserve to rethink its plan to slow its 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 will take over as Fed chairman next month, “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 job gain would be revised up in the coming months. The government adjusts each month’s jobs figure in the following two months as more companies respond to its survey.

Few analysts saw the sharp slowdown as the beginning of a much weaker trend.

“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,” Scott Anderson, chief economist at Bank of the West, said in a note to clients.

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.

Several economists also highlighted statistical quirks in the report that they say are unlikely to be repeated. 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.

And performing arts and spectator sports cut 11,600, the most in 21/2 years. The movie industry shed 13,700 jobs.

“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 looking for jobs. The proportion of people 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 if many of them stop looking for work. Beneficiaries had been required to look for work to receive unemployment checks. The likely increase in people who no longer are looking for work could cause the unemployment rate to fall by up to a quarter-percentage point early this year, economists say.

The Obama administration and Democrats in Congress are pushing to extend the benefits for three more months. It’s unclear if they will succeed.

Among industries in December, health care cut 6,000 positions, that sector’s first monthly job cut in 10 years. If that became a trend, it could raise further questions about how effectively President Barack Obama’s health care program will be carried out.

Transportation and warehousing cut some jobs, suggesting that shippers hired fewer workers for the holidays. Governments cut 13,000 positions.

Despite December’s sharp slowdown, monthly job gains averaged 182,000 last year, nearly matching the average monthly gains for the previous two years.

One bright spot was manufacturing. Factories added 9,000 positions, the fifth straight gain. Still, that’s down from 31,000 in November. Retailers added 55,000 jobs.

Analysts estimate that the economy expanded at a healthy annual rate of 3 percent to 3.5 percent in the October-December quarter. That’s up from earlier forecasts of a 2 percent rate or less. It would follow a strong 4.1 percent growth rate reported for the July-September quarter.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.