US employers hired far fewer workers than expected in January and job gains for the prior month were barely revised up, suggesting a loss of momentum in the economy, even as the unemployment rate hit a new five-year low of 6.6 percent.
Nonfarm payrolls rose only 113,000, the Labor Department said. But with construction recording the largest increase in jobs in almost seven years, cold weather probably was not a major factor in January.
“It is an improvement but a number this soft does feed worries about slowing US growth,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
The second straight month of weak hiring - marked by declines in retail, utilities, government, and education and health employment - could be a problem for the Federal Reserve, which is tapering its monthly bond-purchasing stimulus program.
It was the weakest two months of job growth in three years. December payrolls were raised only 1,000 to 75,000. US stock index futures fell sharply after the report, while prices for US Treasury debt rallied.
The data also comes on the heels of a report on Monday showing a surprise drop in factory activity to an eight-month low in January. The economy grew at a robust 3.7 per cent annual rate in the second half of 2013, buoying hopes that it was now on a path to sustained growth. That optimism is being tested, with other data in January showing slower automobile sales.
But there was a silver lining in the employment report. The jobless rate dropped a tenth of a percentage point to 6.6 per cent last month, the lowest since October 2008.
Economists polled by Reuters had forecast payrolls increasing 185,000 last month and the unemployment rate to hold steady at 6.7 per cent. The household survey from which the jobless rate is derived found strong gains in employment.
In addition, more people came into the labour force, an encouraging sign for the labour market. The participation rate, or the proportion of working-age Americans who have a job or are looking for one, increased to 63 per cent from 62.8 per cent in December, when it fell back to the more than 35-year low hit in October.
“We think the employment market is improving, but will do so in fits and starts,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York. “If the employment market continues to weaken, it is likely that the Fed will slow its tapering plans.”
The unemployment rate is now flirting with the 6.5 per cent level that Fed officials have said would trigger discussions over when to raise benchmark interest rates from near zero. But policymakers have made it clear that rates will not rise any time soon even if the unemployment threshold is breached.
The private sector accounted for all the hiring in January. Government payrolls fell 29,000, the largest decline since October 2012. Manufacturing employment increased 21,000, rising for a sixth month. Retail sector jobs fell 12,900 after strong increases in the prior months, the first decline since March.
Construction payrolls bounced back 48,000 after being depressed by the weather in December. It was the largest increase since March 2007. Average hourly earnings rose five cents, while the length of the workweek was steady at an average of 34.4 hours.
Friday’s report included revisions to data on payrolls, the workweek and earnings going back to 2009. Revisions to this data, which is drawn from a survey of employers, showed 369,000 more jobs than previously thought were created in the 12 months through March 2013, on a seasonally adjusted basis. The report also incorporated new population estimates. (Reuters)
