WASHINGTON (1/13/14)--Recent evidence of an improving recovery might be more flimsy than previously thought, after a Friday report revealed a surprising deceleration of job growth.
Net job growth declined in December to 74,000, according to the Bureau of Labor Statistics--a gain that fell well below economists' expectations. November gains were revised up, but only by 38,000 to 241,000. Moody's said the report's findings were "well below" its expectations, while Forbes expected payrolls to expand by 197,000 (Economy.com, Forbes.com Jan. 10).
The unemployment rate, measured in a separate Labor Department survey did fall, to 6.7% from 7%. But the decrease was primarily attributed to 347,000 people dropping out of the labor force. Consequently, the labor force participation rate fell to a three-decade low, to 62.8%, from 63%. The number of unemployed Americans dropped by 490,000 to 10.4 million.
The biggest staff contractions recorded in the BLS poll occurred in construction, government and information, in which payrolls contract by 16,000, 13,000 and 12,000 respectively. Education and healthcare employment stagnated, while retail added 55,000. Manufacturers and the hospitality industries both added 9,000. Private payrolls, over all, expanded by 87,000--down from 226,000 and 217,000 in November and October.
Moody's and Forbes both said that winter weather can explain some the decline. The former said that severe conditions caused 314,000 people to stay home from work, and reported it being the highest December number in decades. The latter cited a survey showing 273,000 people were unable to work due to inclement weather--a figure reported by Capital Economics chief U.S. economist Paul Ashworth. Forbes added that 166,000 is the December average for weather-related work cancellations in recent years, and that in November only 37,000 workers were kept home due to the elements.
Moody's pointed out that weather doesn't explain all declines, such as those in healthcare, and the sharp labor force contraction. It, nonetheless, still expects the economy to add 200,000 jobs per month in 2014.
Analysts who spoke with Forbes also noted that the setback should only be temporary, and that December's numbers could be revised upward. The director of macroeconomic analysis at the Conference Board, Kathy Bostjancic, told Forbes that her firm's Leading Economic Indicators survey and a poll of purchasing managers suggests that the labor market will strengthen in 2014.