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By Jaclyn Giovis and Mitchell Hartman
Just when the U.S. job outlook looked a little brighter, the Labor Department’s unemployment report threw us yet another curve ball.
The U.S. economy created far fewer jobs than expected in December, even though the unemployment rate dropped to its lowest level in more than a year, the Labor Department said Friday.
Non-farm payrolls increased 103,000, according to the government’s report. That missed projections by economists, who raised their employment forecasts after payrolls processing company ADP Employer Services said on Wednesday that private sector employers added 297,000 last month.
Private hiring rose 113,000, the Labor Department said. Government employment dropped 10,000.
Meanwhile, the nation’s unemployment rate fell to 9.4 percent from 9.8 percent in November — three times the decline that was expected and the lowest rate since May 2009.
The report also includes changes to overall employment numbers for October and November. Those figures were revised to show a gain of 70,000 more jobs than were previously reported.
No one expected a weak increase in jobs; no one expected a big drop in unemployment. We got both.
A partial explanation for the sharp drop in the unemployment rate is that fewer people are telling government surveyors that they’re still looking for work. That suggests the unemployed are more discouraged now, or that their extended unemployment benefits ran out in December and they’ve finally given up hope of finding a job.
Analyzed together, the latest job numbers and unemployment rate suggest “maybe the economy is expanding, but it’s expanding at an extraordinarily anemic pace,” Johnson said.
Market-watchers are more worried about the poor job creation. A 9.4 percent unemployment rate is still considered dismal for an economy heading past the 18-month mark in a so-called “recovery.” It drags down consumption and consumer confidence, which are ultimately needed to boost growth and hiring.
“103,000 jobs added to payrolls was well below both my expectations, and I would say just about everybody’s expectations,” Hugh Johnson, chairman of the asset management firm Hugh Johnson Advisers, said, in an interview with Marketplace Morning Report. “Going into the number we’ve been expecting about 150,000 jobs would be added to payrolls.”
Ultimately, unemployment can’t improve without significant job growth, and so far the nation is still not getting it.
Federal Reserve Chairman Ben Bernanke on Friday expressed cautious optimism about the nation’s economic recovery.
“We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold,” said Bernanke, whose testimony to the Senate Budget Committee was submitted to Congress before the jobs data.
But the Fed chairman also said it could take four to five years for unemployment to drop to a historically normal rate of around 6 percent. His testimony Friday was his first address to Congress since the Fed launched a controversial plan to buy an additional $600 billion in government bonds – a plan he defended.
“Persistently high unemployment, by damping household income and confidence, could threaten the strength and sustainability of the recovery,” Bernanke said.
Unemployment is still twice as high as before the recession, and it can’t drop dramatically until private employers create more than 200,000 jobs month after month after month.
Many economists and market-watchers this week looked at the numbers on weekly jobless claims and ADP’s private payrolls report, and thought maybe we’d tipped the scales and we were “there.”
Turns out, we’re not there yet. And we won’t be for a while.
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