The Times West Virginian

Headline News

January 11, 2014

Surprisingly weak national jobs report puzzles economists

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 2 1/2 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.”

Perhaps as surprising as last month’s weak job growth was the flood of people — 347,000 — 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 are 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.

For all the fluctuations in monthly job growth, hiring has been strikingly stable for three years: Employers added 2.2 million jobs in 2013 and 2012, up slightly from 2.1 million in 2011.

Low-wage industries produced the biggest job gain last year, one reason wage growth has been weak. Employment in the temporary help industry rose nearly 10 percent — the biggest percentage increase for any major industry. Hotels, restaurants and entertainment firms reported the second-biggest increase, followed by retailers.

But hiring also improved last year in higher-paying professional services. This sector includes architects, engineers and information-technology workers.

Kenandy Inc., a developer of business software, expects to double its nearly 100-person staff this year after doubling it in 2013. CEO Sandra Kurtzig says the company is looking for software developers, salespeople and marketing and finance staff.

The Redwood City, Calif.-based company sells its cloud-based software mostly to manufacturers and medical device makers. It’s benefiting as U.S. factory output rises.

“The economy is doing better from what we can see,” Kurtzig said. “There’s a lot of things that are playing to our advantage.”

Among industries in December, health care cut 6,000 positions. 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.

———

AP Economics Writer Josh Boak contributed to this report.

———

Follow Chris Rugaber on Twitter at http://Twitter.com/ChrisRugaber .

 

1
Text Only
Headline News
  • Supreme Court: Michigan affirmative action ban OK

    A state’s voters are free to outlaw the use of race as a factor in college admissions, the Supreme Court ruled Tuesday in a blow to affirmative action that also laid bare tensions among the justices about a continuing need for programs that address racial inequality in America.

    April 23, 2014

  • Court critical of law punishing campaign lies

    The Supreme Court appears to be highly skeptical of laws that try to police false statements during political campaigns, raising doubts about the viability of such laws in more than 15 states.

    April 23, 2014

  • U.S.: Russia has ‘days, not weeks’ to follow by an international accord for Ukraine

    Russia has “days, not weeks” to abide by an international accord aimed at stemming the crisis in Ukraine, the top U.S. diplomat in Kiev warned Monday as Vice President Joe Biden launched a high-profile show of support for the pro-Western Ukrainian government. Russia in turn accused authorities in Kiev of flagrantly violating the pact and declared their actions would not stand.

    April 22, 2014

  • U.S. weighing military exercises

    The United States is considering deploying about 150 soldiers for military exercises to begin in Poland and Estonia in the next few weeks, a Western official said Saturday. The exercises would follow Russia’s buildup of forces near its border with Ukraine and its annexation last month of Ukraine’s Crimean Peninsula.

    April 21, 2014

  • Ukraine, Russia trade blame for shootout

    Within hours of an Easter morning shootout at a checkpoint manned by pro-Russia insurgents in eastern Ukraine, Russia’s Foreign Ministry issued a statement blaming militant Ukrainian nationalists and Russian state television stations aired pictures of supposed proof of their involvement in the attack that left at least three people dead.

    April 20, 2014

  • Governor: Closing Boston amid bomber hunt ‘tough’

    Several days after the Boston Marathon bombing, Gov. Deval Patrick received a call in the pre-dawn hours from a top aide telling him that police officers outside the city had just engaged in a ferocious gun battle with the two men suspected of setting the bombs and that one was dead and the other had fled.

    April 20, 2014

  • Everest avalanche reminder of risks Sherpas face

    The rescuers moved quickly, just minutes after the first block of ice tore loose from Mount Everest and started an avalanche that roared down the mountain, ripping through teams of guides hauling gear.
    But they couldn’t get there quickly enough.

    April 20, 2014

  • Colorado deaths stoke worries about pot edibles

    A college student eats more than the recommended dose of a marijuana-laced cookie and jumps to his death from a hotel balcony. A husband with no history of violence is accused of shooting his wife in the head, possibly after eating pot-infused candy.

    April 19, 2014

  • Everest avalanche kills at least 12

    An avalanche swept down a climbing route on Mount Everest early Friday, killing at least 12 Nepalese guides and leaving four missing in the deadliest disaster on the world’s highest peak. Several more were injured.

    April 19, 2014

  • Diplomacy doesn’t move insurgents in Ukraine

    Pro-Russian insurgents defiantly refused Friday to surrender their weapons or give up government buildings in eastern Ukraine, despite a diplomatic accord reached in Geneva and overtures from the government in Kiev.

    April 19, 2014

House Ads
Featured Ads