Julian Omidi examines an article about job growth and the unemployment rate in the United States.
U.S. employers added only 74,000 jobs in December, the fewest in three years and far below the 205,000 monthly average of the three preceding months. The disappointing figure ends 2013 on a weak note and raises questions about whether the job market can sustain its recent gains.
According to the Labor Department, the unemployment rate fell from 7% in November to 6.7%, the lowest since October 2008. However, the drop occurred mostly because many Americans stopped looking for jobs. Once people without jobs stop looking for a job, the government no longer counts them as unemployed.
It is unclear whether the sharp hiring slowdown may lead the Federal Reserve to rethink its plan to slow stimulus efforts. The Fed decided last month to pare its monthly bond purchases, which are designed to lower interest rates.
Cold weather might have slowed hiring in December. Construction firms cut 16,000 jobs, the biggest drop in 20 months. Still, December’s hiring is far below the average gain of 214,000 jobs a month in the preceding four months. Monthly gains averaged 182,000 last year, nearly matching the previous two years.
Many industries posted weaker gains or cut jobs. Heath care cut 6,000 positions, the first cut in 10 years. Transportation and warehousing cut a small number of jobs, suggesting shippers hired fewer workers for the holidays. Government cut 13,000. The motion picture industry dropped 14,000 jobs.
Manufacturing went up with Factories added 9,000 positions, the fifth straight gain. But that still is down from 31,000 in November. Retailers added 55,000 jobs.
The Federal Reserve’s policy committee meets at the end of the month and will have to decide whether to continue “tapering” their bond-buying program. The have signaled that they will reduce their quantitative easing program by $10 billion or so per meeting, from $85 billion in December to $75 billion in January to potentially, $65 billion in February if they follow through.
The have also signaled that the wind-down could move faster or slowing depending on the data, and the weak December numbers can likely make at least some of the central bank’s officials want to slow down and wait for evidence that the new report was an aberration before continuing the taper.
As to what the Fed will do is hard to guess because we do not have a lot of solid guidance yet on just how sensitive the tapering strategy will be to incoming data. Since the unemployment rate has fallen much more than job growth, as Americans have left the labor force in surpringly large numbers.
By Julian Omidi