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U.S. economy adds 74,000 jobs, unemployment rate falls to 6.7 percent

By Christopher S. Rugaber
Associated Press

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WASHINGTON: U.S. employers added a scant 74,000 jobs in December, the fewest in three years. The disappointing figure ended 2013 on a weak note and raises questions about whether the job market can sustain its recent gains.

Economists cautioned that cold weather likely played a role in the sharp slowdown in hiring. Job gains had averaged 214,000 in the previous four months.

The Labor Department said Friday that the national unemployment rate fell from 7 percent in November to 6.7 percent, its lowest level since October 2008.

But the drop occurred mostly because many Americans stopped looking for jobs. Once people without jobs stop looking for one, the government no longer counts them as unemployed.

A broader measure of employment that includes those who stopped looking for work as well as people working part time but who want a full-time job showed an unemployment rate of 13.1 percent in December. That rate, called the “U-6” by the Labor Department, is down from more than 14 percent a year ago.

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 Americans could accelerate that trend if many of them stop looking for work. They had been required to look for work in order to receive benefits.

It’s unclear whether the sharp hiring slowdown might lead the Federal Reserve to rethink its plan to slow 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 they would want to see more data before concluding that the economy had lost momentum.

A lot of economists expected jobs to increase by 250,000 in December, wrote Ken Mayland, head of ClearView Economics in Pepper Pike, in a note to clients. Of the 74,000 jobs created last month, 40,000 were temporary jobs, he said.

“The paltry payroll increase does not seem to fit the facts,” Mayland wrote. “The line of thinking is that ultimately this result is likely to be revised higher.”

November and December “look like two very different economies,” he wrote.

Mayland said the economy appears to be behaving more like the three-month “trend” showing average monthly job increases of 172,000. He also noted that November jobs figures were revised upward to 241,000 from initial reports of 203,000.

“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.”

Unusually cold weather might have slowed hiring in December. Construction companies, which are heavily dependent on weather conditions, cut 16,000 jobs, the biggest drop in 20 months.

Michael Hanson, an economist at Bank of America Merrill Lynch, estimated that the cold weather lowered hiring by about 75,000 jobs.

It would still be a weak report even if those jobs were added back in, Hanson said. But he cautioned against reading too much into a single month’s jobs report.

“It’s a warning sign that things maybe weren’t as strong as we thought,” Hanson said. But “it’s really hard to make an inference from one number.”

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 2½ years.

Health care cut 6,000 positions, that industry’s first monthly cut in 10 years. It could raise questions about the effect of President Barack Obama’s health-care reform.

Vitner noted that health-care layoffs had been announced over the fall and that these figures appear to be “genuine.”

Transportation and warehousing cut some jobs, suggesting that shippers hired fewer workers for the holidays. Governments cut 13,000 positions.

Beacon Journal business writer Jim Mackinnon contributed to this report.


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