Unemployment rate declines, but job growth is lackluster
02/07/2014 7:39 PM
02/07/2014 7:39 PM
The national unemployment rate fell and more people entered the labor force, but lackluster job growth in January frustrated economists who had hoped the year would kick off with stronger job creation.
The U.S. Bureau of Labor Statistics said Friday that last month’s jobless rate was 6.6 percent, down slightly from 6.7 percent in December. But net job creation was estimated at only 113,000 jobs, far lower the 180,000 that analysts had forecast.
Those numbers described an economy still in “muddle-along territory rather than takeoff mode,” said Julia Coronado, chief economist for BNP Paribas North America.
Muddling along apparently was enough for stock market investors who focused on the positives in the jobs report. The Dow Jones industrial average rose 1.1 percent, the Standard & Poor’s 500 index rose 1.3 percent and the Nasdaq composite gained 1.7 percent.
“The market had a tough time figuring out what to do with the (jobs) number when it first came out,” said J.J. Kinahan, chief strategist with TD Ameritrade. “As the day went on, it just kind of discounted some of the negatives in there to say, what do we really want? We want a growing economy, and these are the jobs we got for a growing economy.”
The best takeways were that unemployment sank to its lowest rate since October 2008 and private-sector employers added jobs for the 47th straight month.
Analysts noted, though, that January’s cold, snowy weather in parts of the country had cut into sales and hiring. Manufacturing output, retail sales and auto sales were all disappointing last month.
Even taking winter weather into consideration, “questions about the sustainability of recent employment gains remain,” said Scott Anderson, chief economist at Bank of the West.
But he also said he thinks the labor market is “healthier than the headline numbers imply.”
Chris Williamson, chief economist at Markit, agreed. Adverse weather “may have suppressed actual hiring compared to the more resilient underlying employment trend,” he said, citing other economic surveys.
And “don’t forget also that the non-farm payroll data are usually revised heavily,” Williamson said.
The labor bureau’s routine data revisions, based on more complete information, did raise previously reported job creation numbers from November and December by 34,000 jobs.
Williamson also suggested that an expected annual GDP growth rate of 3 percent “implies that the hiring trend is likely to revive again in February.”
Nonetheless, economists weren’t encouraged that last month was the second in a row in which hiring was weaker than expected. December’s jobs report also had put a disappointing brake on what had been greater acceleration in hiring in the fall.
Some economists had worried that the workforce would shrink in January because employees who had stayed on the job to get employer-based health insurance could now quit work and get health insurance through the Affordable Care Act. But the January report said the labor force participation rate rose to 63 percent of the 16-and-over population, compared with 62.8 percent in December, a nearly historic low.
Other economists had suggested the participation rate would rise because long-term unemployment benefits ended in December, pushing more people back into active job searches.
The January report said private employers added a net 142,000 jobs while government offices dropped 29,000, mostly in the Postal Service and education.
A somewhat surprising source of payroll weakness was in health care. Gary Burtless, Brookings senior fellow in economic studies, saw “virtually no change in employment in the health sector for two successive months (while) between January 2004 and November 2013, monthly payroll gains in the sector averaged almost 23,000 per month.”
Construction and manufacturing were primary contributors to January job growth.
Despite manufacturing gains, “business leaders continue to have some anxieties about the economy, and we have seen cold weather and sluggishness in export growth dampen output and sales over the past two months,” said Chad Moutray, chief economist for the National Association of Manufacturers.
One notable downside to the otherwise improving jobless rate was that about one-third of the 10.2 million job hunters have been unemployed for six months or longer. Categorized as long-term unemployed, they generally have a harder time becoming re-employed.
The January numbers were affected by the labor bureau’s annual benchmark updates, which use the most recently available Census Bureau data and corporate tax records to fine-tune the size of the labor force and payroll counts. The revisions raised both the employment and labor force estimates.
The labor bureau also reported that average hourly earnings rose 5 cents an hour to $24.21 in January. That created a 1.9 percent raise over the year, compared with a national inflation rate of 1.5 percent.
Separately, a look-ahead report from the Society for Human Resource Management forecasts stronger hiring in February.
Announced layoff rates are lower and hiring expectations are at a four-year high for the month of February, the association’s survey said. The survey also described new-hire compensation as fairly flat.
“It will be interesting to see if improved hiring rates become a steady trend in 2014 and if this will eventually translate into more difficulty filling key positions and a boost in the compensation packages being offered to new hires,” said Jennifer Schramm, the society’s manager of workforce trends.