The Bureau of Labor Statistics (BLS) released Friday its Employment Situation Report, revealing job growth well below consensus forecasts.
According to the government report, the U.S. economy added 74,000 jobs last month. Economists surveyed byBloomberg predicted growth of 200,000, which would have been in line with November’s first report. (That report was revised upward to 241,000).
While December’s job growth was the weakest in years, Paul Ashworth, chief U.S. economist for macroeconomic research firm Capital Economics, says there were other factors at play—meaning there’s no cause for alarm just yet.
“We suspect that the unexpectedly weak 74,000 increase in non-farm payrolls in December is largely because of the unseasonably severe winter weather last month,” Ashworth said. “The labour market certainly looked healthy before December.”
Kathy Bostjancic, director of macroeconomic analysis for the Conference Board, agreed, saying December’s report “stands in contrast to the strengthening posted in other major economic data, suggesting the dip in hiring might prove temporary.”
Still, the drop may throw cold water on any plans for the Federal Reserve to continue its measured slowdown of asset purchases. The Fed looks for steady, stable improvements in the labor market as one of its policy indicators.
Meanwhile, the unemployment rate dropped 0.3 percentage points to 6.7 percent, reflecting a precipitous drop in the labor force. BLS’ report shows the labor force participation rate falling 0.2 percentage points to 62.8 percent, bringing it back to where it was in October.
Employment in the retail trade was up 55,000 in December, boosted largely by job gains in restaurants and clothes retailers. Manufacturing employment rose by 9,000, with growth in primary metals and petroleum and coal products offset by losses in electronic instruments.
In the construction field, job numbers were down an estimated 16,000. Through all of 2013, BLS estimates construction employment rose at an average of 10,000 jobs per month.
The average workweek for all employees on private nonfarm payrolls was down slightly to 34.4 hours, while average hourly earnings were up to $24.17. Over the year, average hourly earnings have increased about 42 cents, according to BLS.