Stocks are trading essentially flat on Wall Street after the a report that showed jobs growth in the United States during December was the slowest in nearly three years and far short of economist expectations. On a positive note, the unemployment rate dropped to its lowest level, but only because the labor force got smaller again.
Labor Department Report Much Lower Than Expected
The Labor Department delivered its much-anticipated non-farms payroll report on Friday, which showed that the U.S. only added a paltry 74,000 jobs last month, after creating 241,000 jobs in November. It was the smallest monthly advance since January 2011. Economists were expecting 193,000 new jobs for December. Some economists blamed the unseasonably frigid and snowy weather as partially responsible for the dismal numbers.
As far as revisions to prior months, October was left unchanged at 200,000 new jobs, while November was upwardly revised from 203,000 to 241,000, meaning that the nation added 38,000 more jobs that originally estimated.
For all of 2013, the country added an average of 182,000 jobs each month, virtually the same as 2012 (+183,000 per month).
Unemployment Under 7 Percent, But Participation at 35-Year Low
The unemployment rate dipped to 6.7 percent in December from 7.0 percent in November, marking the lowest level since October 2008. The driver in this situation obviously wasn’t more jobs, it was less people looking for work. The agency estimated that 347,000 people left the labor force, dragging the so-called participation rate to 62.8 percent, which is tied with October for the lowest in 35 years.
The decline did help take the average unemployment rate for 2013 to 7.4 percent. That’s the lowest in five years, but not necessarily a reason to celebrate given the data behind it. Across 2013, the unemployment rate declined by 1.2 percent.
Retail and Services Lead the Way
In December, jobs were gained in retail trade (+55,000), wholesale trade (+15,000) and professional and business services (+19,000) to comprise the largest portion of new jobs. Job losses were paced by information (-12,000), construction (-16,000) and health care (-5,000). The decline in construction is likely attributable to harsh weather after adding jobs the month prior.
The average workweek edged down by 0.1 hour to 34.4 hours during the month. Average hourly wages nipped ahead by 2 cents to $24.17. For all of 2013, average hourly earnings were up 42 cents, or 1.8 percent.
What's Next For the Labor Market?
The quandary now is: What will the Federal Reserve do? Economic data in recent months has indicated that the U.S. economy is getting stronger, leading to the Fed last month announcing that it is ratcheting down its monthly purchases of Treasuries and mortgage-backed securities, commonly known as quantitative easing, from $85 billion to $75 billion starting this month.
The reality is that there is no need to panic. It was one report of lackluster jobs additions; that’s something that happens now and again. The Fed will take it in stride and evaluate all the other data that surrounds the report going forward, looking for revisions and more upbeat data in January. The fact is that they are still pumping $75 billion into the economy.
With only a few hours left in the trading week, (barring a late-day rally) it’s looking like the Dow Jones Industrial Average is going to have its second straight losing week, but not by much. The Dow is off 18 points and down 44 on the week currently. The S&P 500 is flat on the day and ahead by 7 points on the week. The Nasdaq is ahead 2 points today and up 26 on the week.