In what has to go down as one of the biggest forecasting misses of the year, the economy added just 74,000 jobs in December, the weakest month of job growth in three years. The consensus forecast of economists surveyed by Bloomberg called for an addition of 197,000 jobs, with some of the more optimistic forecasts verging into the range of 230,000.
The unemployment rate, however, did fall to 6.7 percent, the first time it’s been below 7 percent since November 2008. As it’s been for much of the recovery, the lower unemployment rate seems largely a function of people falling out of the labor market, so they’re no longer counted as unemployed. The participation rate continued to drop like a stone and is now at 62.8 percent. That’s down from 66 percent six years ago and is the lowest it’s been since 1977.
Until we get revisions next month, this puts 2013′s pace of job growth exactly in line with the trend we saw in 2012: 183,000 jobs per month on average.
Seasonal adjustments tend to be difficult to predict during the winter months, but following a 203,000 job number in November (which was revised up to 241,000), and tons of strong economic data over the last few weeks, this number appears especially unusual given all the optimism that had been building over the state of the economy.
Though it’s never a good idea to read too much into one jobs report, this one is bad enough that it’s hard to ignore. Most of the job gains were in low wage sectors, such as retail trade that includes bars, clothing stores, and restaurants. Even fields such as health care posted job losses for the first time since 2003.
Before today, many economists had been scrambling to upwardly revise their growth forecasts for the end of the year; this jobs number may spur some of them to reverse course and push them down.
Digging into the numbers, bad weather appears to have played a part. The construction industry shed 16,000 jobs, surprising since the housing market has been so hot recently. The Bureau of Labor Statistics reports that 273,000 workers were unable to get to their jobs due to bad weather, the most since 1977. It’s hard to say how that precisely rippled through to produce such a low number of new jobs, but it didn’t help.
After trimming its losses recently, the government posted a big reduction in jobs, spread across the federal and state level. Local education payrolls fell by nearly 15,000 jobs.
So, is the economy that much worse than we thought? Obviously not. But as has been the hallmark of this uneven, frustratingly slow recovery, every time it looks like the economy is ready to take a big step forward, we get disappointed. This recovery has fooled us so many times before, we shouldn’t be surprised by another bump in the road.