WASHINGTON (AFP) - The US job creation engine sputtered for the second straight month in January, raising fresh questions about the economy’s momentum.
The Labor Department reported Friday that the economy pumped out a net 113,000 new jobs in January, far fewer than the 175,000 that economists had forecast and even farther off the monthly average for last year of 194,000.
While hiring was strong in construction and professional services, retailers and government authorities at all levels shed significant numbers of workers, the department’s survey of business establishments showed.
It came on the heels of January’s 75,000 net hirings, which analysts had hoped was a seasonal fluke explained by severe weather conditions in much of the country.
But the newest data suggested weather was not a significant factor in January. “Folks, this isn’t good news,” said Brookings Institution economist Justin Wolfers. “Today’s data suggest recent trends of good-but-not-great jobs growth is continuing. But they warn us to be wary of a slowdown.”
Still, the monthly report carried a tentative silver lining.
The department’s separate survey of households showed a surge in people returning to the workforce and getting jobs: 638,000 more people had work last month over December. That pulled the overall unemployment rate down to 6.6 percent from 6.7 per cent in December and 7.9 per cent a year ago.
And the labor force participation rate rose to 63.0 percent, though that remains extremely low on historical standards. The same data showed a decrease in the number of people forced to take part-time jobs because of the economy’s weakness, and a fall in the number of those unemployed for more than 27 weeks.
While economists give less weight to the household survey as an indication of the economy’s strength, they said it moderated the low job creation numbers from the establishment poll.
A real gain of 638,000 jobs in January “didn’t really happen,” said Ian Shepherdson of Pantheon Macroeconomics. “But the trend in unemployment is down,” he said.
The White House trumpeted the 47th month of net job creation since the Great Recession ended in 2009 and the unemployment rate hitting its lowest level in more than five years. “But the economy is still healing from the Great Recession and steps are still needed to expand economic opportunity,” said Jason Furman, chairman of US President Barack Obama’s Council of Economic Advisers.
He called for Congress to renew expired unemployment benefits for 1.7 million jobless people, and to support other job creation measures pushed by Obama.
The data raised questions about whether the Federal Reserve will, or should, continue its two-month-old operation to cut back its huge bond-buying stimulus program.
Based largely on the view that the economy was growing steadily and the jobs market was firming, the Fed sliced US$10 billion (S$12.6 billion) from the monthly operation in January and is cutting another US$10 billion this month, bringing it to US$65 billion.
While some analysts say the January data could give them reason to pause, Fed policy makers do not meet again until March, when they will also have February’s data under their belts.
Chris Williamson of Markit said Fed policy makers are likely to note the “erratic nature” of the data and still see the longer-term trend as a steady rise in hiring. “A further taper under new Chair (Janet) Yellen still looks the most likely option, though the certainty of the decision has surely fallen with these numbers,” he said.
Indeed, most economists said that while the data suggests slower overall growth in the first quarter this year after the 3.2 pace percent in the October-December period, the economy will regain speed.
“We still believe the economic fundamentals remain strong and reaffirm our forecast of an acceleration of growth later in the year,” said Doug Handler, chief US economist at IHS Global Insight.
Wall Street, however, appeared to take the report as a suggestion the Fed could slow its monetary tightening schedule. US Treasury yields fell, as did the dollar against the euro, while stocks surged. The S&P 500 gained 1.3 per cent and the Dow Jones Industrial Average added 1.1 per cent.