Payrolls were up only 74,000 last month, the lowest job gain since January 2011 and suggestive evidence that the broader economic recovery has yet to reach the all-important job market. “Suggestive” because we don’t want to build too much into one month’s jobs report, especially when it bucks the recent trend. Remember, these numbers undergo revisions in coming months, so we’ll have to see is this sharp deceleration sticks.
The unemployment once again fell—from 7% to 6.7%–but for mostly the wrong reason: people leaving the job market versus finding work.
I’ll have more to say about the report throughout the day…one question is whether December’s report is distorted—biased down—by any obvious factors. The BLS commissioner mentioned unusually cold weather as one factor possibly driving down construction, which lost 13,000 jobs after averaging +10,000 per month last year. But nothing else jumped out at me (these figures are already adjusted for seasonal patterns, though if those patterns change the seasonal adjustments can take a while to catch up).
In fact, employment growth was slow across most industries, and both surveys—these data come from both a survey of firms and of households—showed weaknesses, suggesting a much weaker than expected job market last month.
Payrolls were up 2.2 million for the full year 2013, about the same as last year—an average of about 180,000 jobs a month. The labor force participation rate, which as mentioned also fell last month, is down 0.8 percentage points over 2013, a large loss in participation at this stage of an economic recovery. The unemployment rate fell from 7.9% in December of 2012 to 6.7% last month, a large annual decline in the jobless rate. But again, most of that fall was due to people leaving the labor force.
One bad report—a report subject to considerable revisions—doesn’t change everything, but these numbers provide a stark reminder that this economic recovery has been fraught with head fakes, and in a sign of the inequality that pervades the US economy, we’ve not yet seen overall GDP or profit growth reach working families in a consistent manner.
In other words, we’re not out of the economic woods yet, and that means there’s still a role for policy to play in helping those who depend on paychecks, not stock portfolios. Most immediately, that means Congress must extend long-term unemployment benefits. Last month, 37.7% of the unemployed had been so for at least six months (2.5% of the labor force), an average that fell only slightly over the year, down about one percentage point. These long-term unemployment measures remain highly elevated, both in historical terms and most importantly relative to times in the past when Congress allowed extended benefits to expire (see table 1 here).
As some of the economic headwinds of the last few years begin to fade, labor demand is slowly and belatedly returning to the American job market. But as this morning’s report suggests, it is still doing so in fits and starts. I’ll look for anomalies that might explain the off-trend results here, but I suspect the reality is that the broader recovery has not yet fully and reliably reached the US job market.