The US job market hit a pothole in December.
Instead of producing jobs last month, as was expected, the economy instead shed 85,000 positions, the Bureau of Labor Statistics (BLS) reported Friday. At the same time, America’s unemployment rate remained stable at 10 percent.
The job loss was a disappointment on Wall Street. Late Friday morning, the stock market was down about 20 points.
“This is not what the market was looking for,” says Burt White, chief investment officer at LPL Financial in Boston. “I don’t think it derails the fact unemployment is now in a V-shape recovery and improving fast. But nothing improves in a straight line.”
Friday’s report did have at least one positive development: The November employment number was revised upward to show a gain of 4,000 jobs. Before, it had been reported as a net loss of 11,000 jobs. With the revised number, November became the first month of positive job growth in almost two years.
In fact, the past several months show that corporate layoffs are slowing, many labor-market analysts believe. Still, companies remain gun-shy about hiring new workers or calling back those who have been laid off.
“The new unemployment-claims numbers show layoffs are slowing but hiring is nowhere,” says Andrew Stettner of the National Employment Law Project in New York. “The only places that seem to be hiring are temp agencies.”
According to the BLS report, temporary-help services added 47,000 jobs in December. Since July, temporary services have added 166,000 jobs.
“Part-time work is becoming for corporate America like an extended job interview,” Mr. White says. “It’s good for a while, but at some point, part time has to turn into full time.”
One sector that saw improvement was manufacturing, where job losses are slowing. According to the report, in December manufacturing companies laid off 27,000 workers, compared with an average monthly decline of 41,000 over the last six months of 2009. Over the first six months of last year, manufacturers shed 171,000 jobs per month.
“Manufacturing is building up inventories, and we’re still in the early phases of that,” White says.
Since December 2007, the economy has shed 7.3 million jobs. And there are now 15.3 million unemployed workers, the BLS reports. Moreover, many of those who are working are not in jobs of their choosing.
The underemployment rate in December rose to 17.3 percent from 17.2 percent in November.
Yet the unemployment rate could be higher, economists point out. In December, some 661,000 people dropped out of the labor force, and they’re not counted in the unemployment rate.
The participation rate – the proportion of people either working or looking for work – fell from 64.9 percent of the working-age population in November to 64.6 percent last month.
“This is a very low reading,” says Bob Brusca of Fact & Opinion Economics in New York. “But we don’t know what it means: Maybe bad weather took a toll on people’s decision on whether to look for work.”
Once many of those people start looking for work, the US unemployment rate will rise, many economists say. Estimates put the unemployment rate as high as 11 percent this year.
On the other hand, some investors may decide that Friday’s job report is not so bad for their investments, White says.
After the job numbers came out Friday, the bond market became less sure there would be an interest-rate hike by the Federal Reserve in June, White notes. Higher interest rates draw money out of the stock market.
“All this really does is put the Federal Reserve on the sidelines,” White says.
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