Payrolls rise less than forecast; jobless rate at 6.7 percent


Shobhana Chandra (c) 2014, Bloomberg News

WASHINGTON — Payrolls in December increased at the slowest pace since January 2011, indicating a pause in the recent strength of the U.S. labor market that may partly reflect the effects of bad weather.

The 74,000 gain in payrolls, less than the most pessimistic projection in a Bloomberg survey, followed a revised 241,000 advance the prior month, Labor Department figures showed Friday in Washington. The median forecast of 90 economists called for an increase of 197,000. The unemployment rate dropped to 6.7 percent, the lowest since October 2008, as more people left the labor force.

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More than a quarter million Americans were not at work because of inclement weather, the most for any December since 1977, the Labor Department said. Employers may be awaiting further evidence that the economy is accelerating before they step up the pace of hiring.

“It’s a reminder that the improvement is not going to be a straight line,” said Michael Feroli, chief U.S. economist at JPMorgan Chase in New York. “The weather probably did play a big role.” Even if you exclude the effect, especially in construction, “it still looks pretty soft.”

The report showed employment in health care and social assistance decreased 1,000 in December, the first decline since July 2003. Payrolls also fell in construction, transportation and warehousing, government and in the motion picture industry.

Revisions to prior reports added a total of 38,000 jobs to overall payrolls in the previous two months. Employment increased 2.19 million last year, little changed from 2012.

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The jobless rate averaged 7.4 percent in 2013, the lowest in five years.

Bloomberg survey estimates for December ranged from gains of 100,000 to 250,000. The unemployment rate for December was forecast to hold at 7 percent.

Inclement weather may have played a role in depressing payrolls during the month. The figures showed 273,000 Americans weren’t at work because of weather.

Bad weather affects the payroll count if employees didn’t receive compensation for the entire pay period that included the 12th of month.

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Last month was the coldest December since 2009 and snowfall was 21 percent above normal, according to weather-data provider Planalytics Inc. The second week of December was the coldest for any comparable period in more than 50 years, the firm said.

The Labor Department’s household survey showed more people were leaving the labor force. The so-called participation rate decreased to 62.8 percent, matching October as the lowest since 1978.

Private employment, which excludes government agencies, rose by 87,000 in December after a 226,000 gain the prior month. The Bloomberg survey median called for a 200,000 advance.

Factory payrolls increased by 9,000 in December following a 31,000 advance in the previous month. Economists had projected a 15,000 gain.

A rebound in manufacturing in the second half of 2013 has coincided with a recent pickup in hiring.

The Institute for Supply Management’s factory index, released on Jan. 2, showed that manufacturing grew in December at the second-fastest pace in more than two years, with a gauge of employment advancing to its highest level since June 2011.

Average hourly earnings rose by 0.1 percent to $24.17 in December from the prior month, and increased 1.8 percent over the past 12 months.

The average work week for all workers fell six minutes to 34.4 hours.

Automakers, coming off their best sales year since 2007, are expanding staff. Dearborn, Mich.-based Ford Motor Co., the second-largest U.S. automaker, plans to add 5,000 jobs in the U.S. as it introduces 16 new vehicles in North America this year.

Southwest Airlines, which last hired flight attendants from outside the company in 2011, received applications at a rate of 80 a minute, amassing 10,000 resumes for 750 openings. Chief Executive Officer Gary Kelly, in a weekly recorded message in December, said it was “like opening up the floodgates.”

At the same time, some companies are trimming their workforce. Palo Alto, Calif.-based Hewlett-Packard Co. plans to eliminate 5,000 positions in addition to the 29,000 already scheduled through fiscal 2014, the technology company reported in an annual filing.

Macy’s Inc., the second-largest U.S. department-store company, this week said it will eliminate about 2,500 to cut costs as it closes some stores. The retailer said its workforce will remain at about 175,000 employees as it adds staff in other parts of the company.

Federal Reserve policymakers, who in December decided to cut monthly bond purchases to $75 billion from $85 billion, cited improvement in the labor market. They also pledged to keep borrowing costs low.

It “likely will be appropriate” to hold the main interest rate near zero “well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal,” according to minutes of the central bank’s meeting released Jan. 8.

— With assistance from Kristy Scheuble in Washington.