WASHINGTON - The U.S. December employment report was weak, with a 74,000 payrolls gain well below average and enough doubt about the recalculation of the lower 6.7% unemployment rate for us to ignore this indicator for now.
December payrolls at +74,000 came after revisions totaling +38,000 for the prior two months. Even accounting for this, the gain was well below the +182,000 monthly average seen in 2013 and is troubling.
Payrolls had broad problems, with many key areas posting dips: construction was -16,000, utilities -1,700, information -12,000 (movies alone at -14,000), government -13,000 (local education -14,900), healthcare -6,000, and accounting -25,000. The gainers could not offset this broad weakness. Manufacturing posted +9,00 jobs, retail +55,300, wholesale +15,400, and temporary jobs +40,400.
The household portion of the survey was weak underneath. It is unclear if the compressed holidays and one-week early survey, the altered seasonal adjustment process, bad weather, the expiry of extended unemployment benefits, or the ongoing trends of lower worker participation affected this series most.
In any case the unemployment rate fell a huge 0.3 point -- a movement seen only a handful of times in recent history -- to 6.7% as labor force participation dropped. Participation fell 0.2 point to 62.8%, and the move for all of 2013 was only 0.8 point.
Updated seasonal adjustments lowered the unemployment rate mainly in spring/summer. The decline in unemployment for all 2013 was 1.2 points, and the rate is approaching the Fed's target.
Hours fell and earnings were weak, suggesting slowing in income and production ahead.
Overall, the December employment report suggests economic slowing.
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