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 have reflected 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 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.
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.
Weaker payrolls suggest “maybe we are getting a bit ahead of ourselves in the belief the economy’s momentum is stronger than it really is,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. Price was the second-best forecaster of monthly payrolls in the past two years, according to data compiled by Bloomberg. “It could be that the economy and labor market are improving, but just not as much as we thought.”
The report showed no change in employment in the education and health services industry, the weakest reading since September 2010. Construction employment fell, factory job growth cooled, and transportation and warehousing payrolls decreased.
Revisions to prior reports added a total of 38,000 jobs to overall payrolls in the previous two months.
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.
Stock-index futures and bond yields fell after the figures. The contract on the Standard & Poor’s 500 Index expiring in March decreased 0.1 percent to 1,830.4 at 8:36 a.m. in New York. The yield on the benchmark 10-year Treasury note dropped to 2.90 percent from 2.97 percent late Thursday.
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.
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.
© Copyright 2023 Bloomberg News. All rights reserved.