Extremely Disappointing Employment News

Just when I thought that we might be out of the woods:

In a blow to hopes that the economy was finally gaining momentum, the government reported on Friday that employers added jobs last month at the slowest pace in three years, although some experts cautioned that wintry weather in many parts of the country may have skewed the data.

In December, employers added just 74,000 jobs, the Labor Department said, well below the 200,000 gain many economists had been looking for. The latest figures were a reversal from healthier monthly payroll gains in the fall that had convinced many economists – as well as policy makers at the Federal Reserve – that the labor market was on a more solid footing.

The unemployment rate did fall to 6.7 percent from 7 percent in November, the lowest since November 2008. But that was largely because of people dropping out of the work force rather than finding jobs.

Economists said that weather exaggerated the weakness in the report. But they also cautioned that other indicators, like average hourly earnings and the labor participation rate, were hardly encouraging.

“Weather is clearly playing a role and you don’t want to overreact to any one number,” said Julia Coronado, chief United States economist at BNP Paribas.

She estimated that cold temperatures and snow subtracted about 75,000 jobs from the overall total for job creation in December.

“What it does say is that we’re not in takeoff mode in the labor market,” Ms. Coronado added. “It’s not so much weakness in hiring as lack of vitality. We’re treading water.”

I’d like to think that the data is skewed simply because of the adverse weather, but even if it is, and even if we are able to add 75,000 jobs, we will still have created under 150,000 jobs. That’s just a terrible rate of job creation and if sustained, it will take us forever and a week to reach full employment levels.

Of equal concern is the Federal Reserve decision this week to taper bond purchases by $10 billion this month, and to end the purchases later this year. Today’s news should serve as an indication that we are not prepared to do that just yet.