US job growth falters as cold weather grips nation
Washington: U.S. employers hired the fewest workers in nearly three years in December, but the setback was likely to be temporary amid signs that unusually cold weather may have had an impact.
The surprisingly weak job growth figures reported by the Labor Department on Friday, however, could cause some discomfort at the Federal Reserve, which last month announced plans to scale back its massive monetary stimulus program.
Nonfarm payrolls rose only 74,000 in December, the smallest increase since January 2011 and well short of the 200,000 jobs or so that most economists had expected.
While the unemployment rate fell 0.3 percentage point to 6.7 percent, its lowest level since October 2008, the decline mostly reflected people leaving the labor force.
"If there ever there was a curveball, this was it," said Marcus Bullus, trading director at MB Capital in London. "These limp numbers are as puzzling as they are surprising."
U.S. stocks were little changed as investors weighed the report. Prices for U.S. government bonds rallied and the dollar fell against a basket of currencies as some traders scaled back bets on how quickly the Fed might close the monetary spigots.
The step back in hiring is at odds with other indicators that have painted an upbeat picture of the jobs market.
Tempering the blow, the government`s survey of employers found 38,000 more jobs were added in November than previously reported. For all of 2013, the economy created 2.2 million jobs.
Construction employment fell last month for the first time since May and leisure and hospitality payrolls rose only marginally, providing hints that extremely cold weather in some parts of the country had held back hiring.
In addition, transportation payrolls recorded their first decline in five months, and the average workweek for all workers slipped by a tenth of an hour to 34.4 hours.
The smaller survey of households from which the jobless rate is derived showed 273,000 people stayed at home because of the bad weather, the most since 1977 and well above the 100,000 average for the month of December.
Economists said the cold weather may have dampened job growth by as much as 100,000 last month.
"We do not think that the disappointing December payroll number marks the beginning of a renewed downward trend," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. "We continue to expect nonfarm payrolls will accelerate towards 200,000 to 225,000 in the course of this year."
The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell 0.2 percentage point to 62.8 percent, returning to the more than 35-year low hit in October.
The decline, which may have partly reflected end-of-year retirements, accounted for two-thirds of the drop in the jobless rate, although a gauge of employment in the household survey also rose.
READING THE WEATHER
The report offered a cautionary note after a string of data - from consumer spending and trade to industrial production - that had suggested the economy ended 2013 on strong footing and was positioned to strengthen further this year.
Other data on Friday showed wholesale inventories rose more than expected in November, leading some economists to upgrade their forecasts for fourth-quarter growth.
GDP growth this year is expected to top 3 percent, a sharp acceleration from the 1.7 percent forecast for 2013.
In a sign of growing confidence in the economy`s prospects, the Fed announced in December that it would trim its monthly bond purchases to USD 75 billion from USD 85 billion, and many economists expect it to decide on a further, similar-sized cut at its next meeting on January 28-29.
While some analysts said the jobs data could lead the Fed to hold steady this month, many said the central bank was unlikely to be swayed by the figures given a multitude of other signs showing economic vigor.
"I don`t think the Fed is going to change its mind based on this," said Bill Cheney, chief economist at John Hancock Financial Services in Boston. "The trend, in a broad sense, still looks quite favorable."
The private sector accounted for all the gains in employment last month, with government payrolls falling 13,000 after rising 15,000 in November.
Manufacturing employment rose 9,000. While that represented a fifth straight month of gains, it marked a slowdown from November`s hefty 31,000 count. The number of construction jobs fell 16,000, snapping six consecutive monthly increases.
Utilities jobs fell by the most in a year.
Not all the job losses could be blamed on the weather. The information sector shed 12,000 positions and healthcare employment fell for only the second time since 1990.
Employment in the retail sector accelerated after slowing in November. There were also payroll gains in professional and business services.
Average hourly earnings rose two cents. Over the past 12 months, hourly earnings have risen only 1.8 percent, a sign the tepid wage gains that have characterized the U.S. economic recovery continue.