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Weak U.S. jobs report could give some hope

Published: February 7, 2014
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For a second straight month, weak U.S. job growth has raised concern that the economy has lost the vigor it showed late last year.

A tepid gain of 113,000 jobs in January followed December’s puny increase of 75,000 — far below last year’s average monthly gain of 194,000.

Yet the jobs report the government issued Friday offered cause for optimism. Solid hiring last month in areas like manufacturing and construction point to underlying strength.

And more people began looking for jobs in January. A sizable 115,000 formerly unemployed people also said they found jobs. Their hiring reduced the unemployment rate to 6.6 percent, the lowest in more than five years.

Most economists predict hiring will strengthen during 2014 as the economy further improves.

Job growth “clearly has downshifted over the past two months,” said Doug Handler, chief U.S. economist at IHS Global Insight. “But we still believe the economic fundamentals remain strong and … forecast an acceleration of growth later in the year.”

Janet Yellen will be pressed about the job market and the economy when she testifies to Congress next week in her first public comments since becoming Federal Reserve chair on Feb. 1. Fed officials are scaling back their stimulus for the economy. They have also said they would consider raising their benchmark short-term interest rate at some point after the rate falls below 6.5 percent.

But the Fed hasn’t been clear about the timing. With the unemployment rate now close to that threshold, economists think the Fed may update its guidance after its next meeting in March.

Friday’s jobs data suggest that the economy may slow in the first few months of the year from its robust 3.7 percent annual pace in the second half of 2013. The hiring figures follow other signs of a possibly softening economy. A survey of manufacturing firms showed that factory expansion slowed last month. A measure of forthcoming home sales fell.

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At a glance

A glimmer

of hope

Employers added just 113,000 jobs last month, far fewer than economists had expected. Job cuts by retailers and government agencies lowered overall hiring. But the Labor Department report contained enough good news to sustain hopes that 2014 may be a solid year for the U.S. economy. Consider:

Unemployment didn’t just fall to a five-year low of 6.6 percent; it fell for the right reasons. Nearly 500,000 Americans poured into the job market last month, and 616,000 more people said they had jobs. Previous drops occurred partly because many Americans gave up looking for work.

Factories, mines and construction firms hired at a healthy pace. These industries added 76,000 jobs in January, the most since January 2006. Hiring by goods producers is typically seen as a harbinger of an improved job market.

The job market entered 2014 in better shape than previously believed. The Labor Department announced revisions Friday that added 369,000 jobs to U.S. payrolls last year. Employers added 2.3 million jobs last year, the most since 2005.

Associated Press

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