US job growth faltered as employers hired the fewest number of workers in almost three years in December.
Wall Street seemed to conclude that unusually cold weather last month had distorted the figures. That view was bolstered by employment in the construction industry falling for the first time since May and the fact that leisure and hospitality payrolls increased only marginally
Nonfarm payrolls rose by just 74,000, that was a huge contrast to November’s total, which was revised upwards by an additional 38,000 to 241,000.
The unemployment rate fell to 6.7 percent from 7.0 percent. That mostly reflected Americans leaving the work force.
This does however create a conundrum for the Federal Reserve.
It is starting to trim its stimulus programme in a sign of growing confidence in the economy’s prospects
Incoming Fed head Janet Yellen now has to decide whether the weather was to blame for the shock drop in job creation.
The financial markets wait to see if the US central bank will continue winding down the bond buying that it has been using to pump money into the economy.
“The Fed will see through it as a weather issue,” said John Canally, an economist at LPL Financial in Boston. “I don’t think they will change after one month of anything bad or good – so they are going to stay the course.”
One factor the Fed policymakers will have to take into account is that
the step back in hiring is at odds with other employment indicators that have painted an upbeat picture of the jobs market.
A string of data – from consumer spending and trade to industrial production – that had suggested the economy ended 2013 on strong footing and was positioned to strengthen further this year.
GDP growth this year is expected to top 3.0 percent, a sharp acceleration from the 1.7 percent forecast for 2013.