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"The Fed will see through it as a weather issue," said John Canally, an economist at LPL Financial in Boston. "I don't think they will change after one month of anything bad or good - so they are going to stay the course.
U.S. job growth falters as cold weather grips nation
12 hours ago
Job seekers stand in line to
meet with prospective employers at a career fair in New York City,
October 24, 2012. REUTERS/Mike Segar
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. employers hired the fewest number of
workers in almost three years in December, but the setback was likely to
be temporary amid signs that unusually cold weather may have had an
impact.
The surprisingly weak job growth
figures reported by the Labor Department on Friday, however, complicated
the picture for the Federal Reserve, which last month announced plans
to scale back its massive monetary stimulus program.
Nonfarm payrolls rose only 74,000 in December, the smallest increase
since January 2011 and well short of the 200,000 jobs or so that most
economists had expected.The unemployment rate fell 0.3 percentage point to 6.7 percent, its lowest level since October 2008, but the decline mostly reflected people leaving the labour force.
"If there ever there was a curveball, this was it," said Marcus Bullus, trading director at MB Capital in London. "These limp numbers are as puzzling as they are surprising."
U.S. stocks rose at the open, as investors appeared to discount the data as being distorted by weather, but later slumped into negative territory. Prices for U.S. Treasury debt rose and the dollar slid as some traders scaled back bets on how quickly the Fed might close the monetary spigots.
The step back in hiring is at odds with other employment indicators that have painted an upbeat picture of the jobs market. Tempering the blow, the government's survey of employers found that 38,000 more jobs were added in November than previously reported.
Construction employment fell last month for the first time since May and leisure and hospitality payrolls rose only marginally, suggesting that extremely cold weather in some parts of the country had held back hiring. In addition, transportation payrolls recorded their first decline in five months.
The smaller survey of households
from which the jobless rate is derived showed 273,000 people stayed at
home because of the bad weather, the most since 1977.
But the impact on the payrolls data should have been muted as anyone
who worked at all during the pay period that included the 12th day of
the month would have been counted as employed.The department said severe weather is more likely to impact hours worked than employment, and there was a decline in the length of the average workweek.
Economists polled by Reuters had expected job gains of 196,000 jobs last month. But many pushed up their forecasts in the wake of upbeat labour market data during the week.
"Given the disappointing jobs
report flies in the face of nearly every other labour market metric of
late, all which point to a strengthening trend, we would put most of the
surprise down to bad weather rather than a bad economy," said Jennifer
Lee, a senior economist at BMO Capital Markets in Toronto.
The labour force participation
rate, or the proportion of working-age Americans who have a job or are
looking for one, fell 0.2 percentage point to 62.8 percent, returning to
the more than 35-year low hit in October. The decline accounted for
two-thirds of the drop in the jobless rate, although a gauge of
employment in the household survey still rose.
READING THE WEATHERThe report offered a cautionary note after a string of data - from consumer spending and trade to industrial production - that had suggested the economy ended 2013 on strong footing and was positioned to strengthen further this year.
GDP growth this year is expected to top 3 percent, a sharp acceleration from the 1.7 percent forecast for 2013.
In a sign of growing confidence in the economy's prospects, the Fed announced in December that it would trim its monthly bond purchases to $75 billion from $85 billion starting in January, and many economists expect it to decide on a similar-sized cut at its next meeting on January 28-29.
While some said the jobs data could lead the Fed to set aside plans to further curtail its stimulus, many said the central bank was unlikely to be swayed by the figures.
"The Fed will see through it as a
weather issue," said John Canally, an economist at LPL Financial in
Boston. "I don't think they will change after one month of anything bad
or good - so they are going to stay the course."
The private sector accounted for
all the gains in employment last month, with government payrolls
falling 13,000 after rising 15,000 in November.
Manufacturing employment rose 9,000. While it represented a fifth
straight month of gains, it was a slowdown from November's hefty 31,000
count. The number of construction jobs fell 16,000, snapping six
consecutive months of gains.Employment in the retail sector accelerated after slowing in November. There were also payroll gains in professional and business services.
Average hourly earnings rose two
cents. Over the past 12 months, hourly earnings have risen only 1.8
percent, a sign that the tepid wage gains that have characterized the
U.S. economic recovery continue.
(Reporting By Lucia Mutikani;
Additional reporting by Chuck Mikolajczak in New York and Ann Saphir in
San Francisco; Editing by Andrea Ricci, Tim Ahmann and Paul Simao)
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