The U.S. economy added a disappointing 74,000 jobs in December 2013, well below the consensus estimate of 200,000 new jobs. While the national unemployment rate fell to 6.7 percent in December, the decline is attributed to a sharp drop in the labor force rather than people finding jobs. There are 10.4 million unemployed Americans looking for work.
Employment Hinges on Job Growth
Last month’s employment gain is the lowest since January 2011. We’re now more than four years into the economic recovery, and the unemployment rate remains near levels previously seen only during recessions.
Not Nearly Enough New Jobs
Last month, the Federal Reserve indicated it would reduce its monthly purchase of mortgage-backed and other securities from $85 billion to $75 billion. The Wall Street Journal noted that the December jobs report “is likely to temper the Federal Reserve's recent optimism about the health of the economy.” The Board of Governors will meet January 28-29.
Trouble with Labor Force Participation
The labor force participation rate is 62.8 percent, a decline of 0.2 percent from last month and tied for the lowest level in 35 years. The civilian labor force fell by 347,000 in December. The decline in the workforce participation rate is worrisome to economists and the Federal Reserve. The longer people are out of work, the worse their odds of finding steady work again. More than 18.7 million people have been out of work for more than six months.
There were also 917,000 people in December categorized as “discouraged workers,” an increase of 155,000 over the previous month. Discouraged workers are not currently looking for work because they believe no jobs are available for them. If the labor force participation rate were the same as January 2009, the unemployment rate would be 10.8 percent. The share of American adults with jobs -- 58.6 percent in December -- is more than five percentage points below its pre-recession peak. Also of concern is the 7.8 million people reported as working part time for economic reasons – those unable to find a full-time position or whose hours have been cut back.
The long-term unemployed make up 37.7 percent of all unemployed people -- an increase of 0.4 percent from November. During the 1980s, when our country faced a similar recessionary period, the proportion of long-term unemployed never exceeded 27 percent.
The “real” unemployment or U-6 rate is 13.1 percent for December 2013, and the “real” number of unemployed Americans is 20.6 million. This includes people who are unemployed (10.4 million), want work but have stopped searching for a job (2.4 million), or are working part time because they can’t find full time employment (7.8 million).