Make us your home page
Instagram

Unemployment rate isn't something to celebrate

WASHINGTON — Groan. Ugh. Sigh.

Select your own preferred grunt in response to the December employment report, which in an instant made the progress the U.S. economy has been showing look more questionable. The nation added only 74,000 jobs in December, the weakest showing since the start of 2011, and far below the 205,000 monthly average the three previous months.

The unemployment rate fell to 6.7 percent, the lowest since October 2008. But this apparent good news has a dark lining: 347,000 people dropped out of the labor force while only 143,000 additional people reported having a job. Interestingly, a broader measure of unemployment that captures people who have given up looking didn't budge (13.1 percent).

Here's a go at putting a positive spin on these numbers: They just can't be real. All other evidence we have on the economy is inconsistent with a mere 74,000 newly added jobs, and in fact is more consistent with the 200,000-ish levels of previous months. Manufacturing surveys report strong output. Trade numbers look favorable. Business investment appears strong. Indeed, overall GDP growth for the second half of 2013 looks the strongest in years.

And jobs numbers become erratic around the holidays due to seasonal adjustment. The Labor Department adjusts the numbers to account for the routine passing of the seasons, but the spike in holiday employment around Christmas combined with winter weather to disrupt economic activity means those adjustments can create distortions that tell us nothing about how the economy is really doing. Indeed, the Labor Department specifically identified bad weather as a possible factor in a 13,000 drop in specialty trade contractors.

And the December report actually revised previous months' job-creation totals up by 38,000 positions, not at all the kind of revision you would expect to see if job growth was really falling off a cliff.

So, the usual caveats around the jobs numbers — it is one month's number, with a big range of error around it — apply more than usual in this one. Still, one doesn't envy the policymakers who have to decide what to do based on this shaky data.

The Federal Reserve's policy committee meets at the end of the month and will have to decide whether to continue "tapering" their bond-buying program. They have signaled that they'll reduce their quantitative easing program by $10 billion or so per meeting, from $85 billion in December to $75 billion in January to, potentially, $65 billion in February.

But they've also signaled that the wind-down could move faster or slower depending on the data, and the weak December numbers will likely make at least some of the central bank's officials want to slow down and wait for evidence that the new report was an aberration before continuing the taper. Already, one official (Eric Rosengren of the Boston Fed) dissented in December, wanting more evidence that the jobs recovery was firmly entrenched.

What they will do about that is hard to guess, as we don't have a lot of solid guidance yet on just how sensitive the Fed's tapering strategy will be to incoming data. More plausible is that they will revisit their 6.5 percent unemployment rate "threshold" at which they will begin considering a hike in short-term interest rates. That seemed sensible when it was introduced in December 2012, but since then the unemployment rate has fallen much more than job growth alone would justify, as Americans have left the labor force in surprisingly large numbers. Look for a heightened debate over changing the threshold in the weeks ahead.

Unemployment rate isn't something to celebrate 01/10/14 [Last modified: Friday, January 10, 2014 10:43pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Washington Post.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Tampa is 15th-most popular city to move to with U-Haul

    Markets

    TAMPA —Tampa is undoubtedly a destination point, at least according to U-Haul.

    Tampa is the No. 15 destination for people moving with U-Haul trucks. | Times file photo
  2. Florida's economy growing faster than other big states and far better than U.S. overall

    Business

    When it comes to economic growth, Florida's running alongside the leading states and well ahead of the United States as a whole.

  3. Westshore Marina District project takes shape with another acquisition

    Real Estate

    TAMPA — One of Tampa Bay's prime waterfront areas took another major step toward redevelopment Friday as WCI Communities bought 2.35 acres in Westshore Marina District.

    WCI Communities, Lennar's high-end subsidiary,has paid $2.5 million for 2.35 acres in the Westshore Marina District for 35 townhomes. WCI is under contract  to buy an additional 9.5 acres.
[BTI Partners]
  4. Posh Guy Harvey RV park to open in Tampa Bay with $250,000 cottages

    Business

    HOLIDAY — Love those Guy Harvey T-shirts with the soaring marlins? In the not too distant future, you might be able to kick back in your own Guy Harvey cottage in the first-ever Guy Harvey RV park.

    Renderings of the clubhouse and an RV cottage site of the planned Guy Harvey Outpost Club & Resort Tarpon Springs.
[Guy Harvey Outpost Collection]
  5. Port Tampa Bay secures $9 million grant to deepen Big Bend Channel

    Business

    Port Tampa Bay has secured a $9 million grant from the U.S. Army Corps of Engineers for the widening and deepening of the Big Bend Channel in southern Hillsborough County.