Dismal Jobs Report Raises Questions Over Economy’s Strength as Year Ended; Bad Weather a Factor?
Source: Brenda Cronin and Jonathan House, The Wall Street Journal, January 10, 2014.
A Historical Perspective – U.S. Unemployment Since 1948
The downbeat readings were partly attributed to distortions caused by bad weather, and many economists warned that the report may prove to be a fluke. Employers, too, are reporting a mixed take on the economy and their labor needs.
The weak job numbers didn’t appear to faze stock investors but fueled a rally in bonds. The Dow Jones Industrial Average was little changed, dropping 7.71 points, or less than 0.1%, to 16437.05. The yield on the 10-year Treasury note, which moves inversely to its price, dropped 0.106 percentage point to 2.858%, its steepest daily slide since Sept. 20.
Michael Jones, chief investment officer at RiverFront Investment Group, said $75 billion in bond purchases is still big enough to support the stock market and he expects the Fed to move ahead with another $10 billion cut in its bond-buying program when it meets later this month. “Given that the Fed is still supporting us,” he said, the market shouldn’t take a big hit “despite the conflicting data.”
At Hayes Cos., a maker of metal parts in Pineville, La., “our biggest obstacle right now is finding skilled labor,” said Chief Executive James Hayes. The energy boom is driving business at the family-owned manufacturer, which makes parts for equipment in the oil and gas industry, as well as for train tank cars and other purposes.
“We need welders, fitters, machinists.…All the things manufacturing companies need, we need it,” Mr. Hayes said. “We have the work, we have no people.” The company aims to add another 75 jobs in the next few years to its current workforce of 140, he said.
The picture in Friday’s job report was far different from what Mr. Hayes painted. Government payrolls declined by 13,000 in December, and health care—usually a steady source of job growth—declined by 1,000. Construction jobs, which are often weather-dependent, declined by 16,000. Manufacturing payrolls expanded just 9,000.
One piece of good news in Friday’s report was a substantially revised increase in November’s tally, to 241,000 new jobs from 203,000. “Typically when you have upward revisions to prior months’ data, that’s an indication that things are getting better,” said Ward McCarthy, chief financial economist at Jefferies LLC. December’s 74,000 tally—the Labor Department’s first estimate—in turn, could be revised in next month’s report.
Friday’s weak jobs number may have been due less to weather than payback for an exceptionally strong reading in November, said Tom Porcelli, chief U.S. economist at RBC Capital Markets. It looks as if November’s “241,000 is an outlier just like [December’s] 74,000 is an outlier,” Mr. Porcelli said. “The answer is somewhere in the middle.”
Some labor-market softness is evident at Complete Advanced Maintenance Co., of Ebensburg, Pa. Camco just let six workers go, said President Warren Myers—marking the firm’s first layoffs in years. Camco, which tests and repairs electrical switching gear for heavy industry, mines and steel mills, has seen demand shrink for work on equipment for coal mines and coal-fired power plants.
The layoffs brought the company’s workforce down to about 45 employees. Mr. Myers said he hopes to call back the laid-off workers, but it is too soon to tell if business will pick up.
December’s jobs report puts a sober capstone on what had otherwise been a promising finish to 2013. The 182,000 average monthly jobs gains in the past year were nearly unchanged from those of 2012. The labor-force participation rate, which measures the share of the population available to work, declined in December from 63% to 62.8%, returning to the 35-year low touched in October. The ranks of those looking for a job for more than a year was 2.6 million in December.
Long-term unemployment, a hallmark of the 4½-year recovery, changed little between November and December. The number of people out of work for 27 weeks or longer held steady at 3.9 million last month, or 37.7% of all unemployed individuals.
In late December, federal emergency unemployment benefits to 1.3 million long-term unemployed expired. In some states, unemployed individuals could have received benefits for up to 73 weeks before the program expired. Lawmakers in Washington are considering an extension but remain divided about a number of aspects, including how to pay for it.
Meanwhile, last month’s most significant job gains were in sectors that traditionally aren’t high-paying, such as retail, which added 55,000 positions. The temporary-help sector increased by 40,000.
Bracing for breaking into a tough job market, Adam Kleven began looking for work months before his graduation last month from the University of Michigan, where he studied political science and communications.
Mr. Kleven, who is 21 years old, said he applied for more than a dozen jobs before landing his first interview. He ended up with two job offers as a legal assistant and started work this past week with a Northville, Mich., firm.
“I feel lucky,” he said. “I have a lot of friends with business degrees who are still looking for jobs, and I’m a liberal-arts major.”