WASHINGTON (2/10/14)--A report released Friday by the Labor Department showed the second consecutive month of lower-than-expected job growth, confounding experts.
U.S. payrolls increased by 113,000 in January, while the initial December report was only upwardly revised by 1,000 to 7,500.
"This is a particularly weird month, coming as it does after December's strange and less-than-fully believable results," said Bill Hampel, chief economist of the Credit Union National Association (CNNMoney.com Feb. 6).
The private sector added 142,000 jobs, while the public sector cut 29,000 positions (The New York Times Feb. 7). Construction and manufacturing sectors added 48,000 and 22,000 jobs, up from reductions of 22,000 and 8,000 in December, but the service industry added just 66,000 jobs, down from 102,000 last month (Economy.com Feb. 7). Financial services also shed 2,000 workers, which Moody's attributed to a decline in foreclosure and mortgage refinancing activity.
The extent to which weather was a factor is unclear, given the hiring in some sectors and job losses in others. The poll was also taken during a week in which the weather was relatively calm. But Moody's said that the labor market has not fundamentally changed and results were "far below consensus" forecasts. The New York Times reported that economists expected payrolls to swell by 180,000 in January. Moody's analysts, who had previously predicted an increase of 175,000 jobs in January (See Friday's News Now: Sharper decline than expected for jobless claims), said that monthly payroll should be more than 200,000 "once the snow melts and temperature rises."
The late December withdrawal of extended unemployment benefits from 1.35 million Americans doesn't appear to have significantly affected the labor force. The labor force participation rate increased to 63% in January from 62.8%, while the unemployment rate declined to 6.6%, from 6.7%. Moody's, however, warned that workers whose long-term benefits haven't been renewed by Congress should be "expected to leave the labor force" over the next few months.
In a shred of good news from Friday's report, payroll additions in November were revised up by 33,000 to 274,000.
The New York Times cautioned that the January report could "spur fears" of "yet another slowdown" in the labor market. It added that the Federal Reserve's decision to cut quantitative easing by $10 billion in both January and February is "looking increasingly premature."