The U.S. economy created just 74,000 jobs in December, the slowest pace in three years, disappointing both economists and policymakers who had concluded that the labor market was finally gaining some sustained momentum.
Experts had expected the economy would add just under 200,000 positions in December, and the huge shortfall also stood in sharp contrast with the overall pace of job creation in 2012 and 2013. In those years, employers added an average of 182,500 positions a month.
Just last month, the Federal Reserve announced that it would begin pulling back on its enormous stimulus program after several months of healthier job gains. But the latest data call into question whether the central bank’s optimism was premature.
The unemployment rate seemingly improved in December, falling to 6.7 percent from 7 percent in November. But 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 unemployment 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.
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.
“I don’t think the Fed is going to be panicked by this,”said Joel Naroff, president of Naroff Economic Advisors.
Naroff suggested that the 6.7 percent unemployment rate - a drop of more than a full percentage point since 2013 began - will eventually lead many employers to raise wages.
“It doesn’t change what they’re thinking,” Naroff said of the Fed.
Many economists said it would be premature to con-clude from Friday’s report that the economy is weakening.
“We stop short of making larger observations based on this number,” said Dan Greenhaus, chief global strategist at brokerage firm BTIG. “The economy, based on any number of other indicators, has been picking up steam of late which makes today’s number curious.”
Although some sectors, like retailing, posted decent gains, other sectors that had been healthy during 2013 reversed course in December, significantly lowering the overall performance of the job market.
For example, the construction industry lost 16,000 jobs in December, a sharp reversal from the 2013 average monthly gain of 10,000 jobs. Similarly, health care-employment fell by 6,000, compared with monthly gains of 17,000 in 2013 and 27,000 in 2012.
Average hourly earnings rose by 0.1 percent to $24.17 in December from the previous month and increased 1.8 percent over the past 12 months.
The average workweek in the private sector fell to 34.4 hours, a drop of a tenth of an hour and another sign of weakness in the broader economy.
Wintry weather did have some effect, it was clear. Government statisticians reported that 273,000 people were prevented from going to their jobs last month, the most since December 1977 and nearly 100,000 more than is typical for December over the past decade.
“It’s a reminder that the improvement is not going to be a straight line,” said Michael Feroli, chief U.S. economist at JP Morgan Chase & Co. in New York. While “the weather probably did play a big role,” he said, “it still looks pretty soft.”
Even if colder weather inhibited hiring somewhat, that’s not enough to account for all of the weakness, Berger said. The last time the results of the payroll survey fell so far short of expectations was in November 2008, just as the economy was falling deeper into recession after the collapse of Lehman Brothers.
Information for this article was contributed by Nelson D. Schwartz of The New York Times; by Christopher S. Rugaber and Josh Boak of The Associated Press; and by Shobhana Chandra of Bloomberg News.
Business, Pages 27 on 01/11/2014