‘Bizarre,’ ‘Perplexing’ December Jobs Report Stumps Economists

No one expected such a small uptick in jobs. So, what happened?

Bureau of Labor Statistics of the Labor Department officials testify during a hearing before the Joint Economic Committee January 10, 2014 on Capitol Hill in Washington, DC.
National Journal
Catherine Hollander
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Catherine Hollander
Jan. 10, 2014, 7:45 a.m.

Eco­nom­ists de­ployed their ar­sen­al of syn­onyms for “weird” Fri­day in try­ing to de­scribe the Decem­ber jobs re­port, but the mes­sage was clear: What the heck happened?

Many ex­pec­ted payrolls to swell by around 200,000 jobs. So you could just feel the jaws drop­ping up and down Wall Street at 8:30 a.m. when the Bur­eau of Labor Stat­ist­ics re­por­ted a mea­ger gain of 74,000. Even the un­em­ploy­ment rate, which de­clined to a lower-than-ex­pec­ted 6.7 per­cent from 7 per­cent in Novem­ber, fell largely for the wrong reas­on — people leav­ing the work­force. “This is just one of the most un­usu­al re­ports, really, I’ve seen in quite a long time here,” said Douglas Hand­ler, chief U.S. eco­nom­ist at IHS Glob­al In­sight.

What happened? Why were the fore­casts so off the mark? Or will BLS change its num­bers when it re­vises them next month? We won’t really have a bet­ter sense un­til Feb. 7, when the agency re­leases its next em­ploy­ment re­port.

In the mean­time, eco­nom­ists have a few ideas:

  • Blame the weath­er. Some ex­cep­tion­ally bad weath­er last month might have dragged down con­struc­tion em­ploy­ment, which fell by 16,000 in Decem­ber, and brought over­all payroll num­bers down by between 50,000 and 75,000, Mor­gan Stan­ley eco­nom­ists es­tim­ate. BLS also cited “un­usu­ally cold weath­er” as a po­ten­tial cul­prit for a de­cline in con­tract­or em­ploy­ment. But the weath­er doesn’t ap­pear to ac­count for all of the weak­ness.
  • Things are not really get­ting bet­ter, faster for the labor mar­ket, and this is just evid­ence we were too op­tim­ist­ic in mak­ing our pre­dic­tions. The av­er­age job growth per month in 2013 (182,000) doesn’t look all that dif­fer­ent from 2012 (183,000) or 2011 (175,000). And labor force par­ti­cip­a­tion — a meas­ure of people who either have or are look­ing for jobs — con­tin­ued to de­cline last month, fall­ing by 0.2 per­cent­age points and off­set­ting an in­crease in Novem­ber. The weak­ness in the Decem­ber jobs re­port was pretty much across the board: There was not a lot of good news to be found, oth­er than the pos­sib­il­ity this was just a strange blip.
  • Things are really get­ting bet­ter for the labor mar­ket, and this is just noise. This the­ory says the num­bers are so out of line with Novem­ber’s gain of 241,000 jobs, and an over­all sol­id eco­nom­ic end to 2013, that it’s prob­ably just due to some strange sea­son­al-ad­just­ment factors (the way the gov­ern­ment smooths out its num­bers to ac­count for dif­fer­ent be­ha­vi­or in dif­fer­ent sea­sons) and weird weath­er. That com­bin­a­tion means this re­port really doesn’t say all that much: Stick to the three-month av­er­ages or longer for the real story. “There’s a les­son to be learned, I think, from the data that you don’t take the re­cov­ery for gran­ted, but I do think this is go­ing to be seen more as an ab­er­ra­tion than any­thing else,” said IHS’s Hand­ler.
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