After several consecutive months of job gains near or above 200,000, the streak came to an abrupt halt with the December jobs report – reminding everyone how fragile our economy still is.
Payroll growth last month slowed to the slowest pace since January 2011. Employers added a skimpy 74,000 jobs in December, Friday's Labor Department report revealed.
That was well below even the most cautious expectations.
Surveys showed economists expected gains of 197,000 to 205,000, with the unemployment rate remaining at 7%. Many analysts raised projections after Wednesday's report from private payroll processing firm ADP showed businesses added 238,000 jobs in December, the most in 13 months.
The lackluster job creation wasn't the only "surprise" in the December jobs report. The unemployment rate unexpectedly fell to 6.7% from 7%, marking the lowest level since October 2008.
Digging into the reasons behind the drop shows just how troubling this situation is. That's because the decline was due to some 347,000 discouraged Americans simply dropping out of the work force.
"Despite the good headline news (the dip in the unemployment rate), the U.S. economy is still experiencing problems stemming from the 2008 mortgage crisis," Steven Pressman, Professor of Economics at Monmouth University in Long Branch, NJ, told Money Morning. "A good part of the unemployment rate decline was due to people giving up and not looking for work. These people don't get counted as unemployed because they're not seeking work. The decline in the employment population ratio to 62.8%, the lowest rate since 1978, reinforces this. A number like this can only be regarded as disturbing."
Disturbing indeed. The number of people not in the workforce swelled by 525,000 in December to 91.808 million. That's a huge exodus of people leaving the employment arena. And the figure dwarfs the meager number of jobs created.
More Disturbing December Jobs Report Details
Other labor market indicators highlighted in the December report are also bothersome: