December Payroll

The economy continued to add jobs as 2013 came to a close, but the reported pace was significantly slower than the recent trend. The Bureau of Labor Statistics reported just 74,000 jobs were added in December. This follows November’s upwardly revised total of 241,000 new jobs (originally 203,000). Despite the slow growth in payrolls, the unemployment rate fell to 6.7 percent from 7.0 percent in November.

The three-month average for payroll additions is 172,000. That puts this month’s figure nearly 100,000 jobs shy of the recent trend. The prior two months for this indicator have been particularly strong, so if the six-month average is used, that still puts the recent trend at 170,000 jobs. December’s tally stands out and will likely require revisions in the months ahead.

The drop in the rate of unemployment was largely caused by fewer workers in the work force. To end the year, 347,000 people fell out of the labor pool. The changing dynamics of the pool of workers is discouraging and largely unavoidable. The labor force is aging with the baby boomers, so as they exit the labor market, the nation’s labor participation will remain under pressure until they have completely left the market or are being replaced by a younger cohort as quickly as boomers leave.

It is impossible to know why there was such a sharp break from the recent jobs growth trend. It could be a problem with the data, weather related, or a real slowdown. The last explanation is the one Atlas worries about least; it seems to be an unlikely explanation. Another indicator that Atlas follows, the Institute for Supply Management (ISM), contradicts the payroll figure. According to ISM data, both segments of the economy, manufacturing and services, added jobs at an increasing pace with the largest portion of the economy, services, increasing significantly in the period. The way Atlas sees it, December’s payroll figure will likely be revised higher. (by C. Cox)