T he final BLS Employment Situation release for 2013 ended the year on a pronounced down note, reporting that only 74,000 new jobs were created in December.
This number compares very unfavorably to consensus expectations of about 200,000 net new jobs. Despite the low job creation numbers, the unemployment rate fell from 7.0 percent to 6.7 percent. The unemployment rate fell largely because in December 347,000 individuals abandoned efforts to find a job and were no longer counted as unemployed. In 2013 overall, the working age population grew by almost 2.4 million, while the number of people participating in the labor force fell by 548,000, driving the labor force participation rate down 0.8 percent through the year to 62.8 percent, the lowest values in 35 years. While the goal of driving down unemployment is being achieved, it is being accomplished in a way that raises concerns about long term economic vitality.
Adding to the negative tone of the December report, the average work week declined by a tenth of an hour to 34.4 hours per week.
The meager number of new jobs reported for December came as a surprise in light of more encouraging recent economic reports. Job creation in 2013 through November had averaged 192,000. New unemployment insurance claims are declining. The Institute for Supply Management reported consistent growth in the manufacturing sector in the second half of the year. The S&P 500 rose 29.6 percent in 2013, its best performance in 15 years.
The weak December employment report may prove to be an anomaly among a steady stream of modest job creation gains. The BLS revised the November new job number upward by 38,000 to +241,000; December may receive similar treatment in subsequent reports.
Temp Employment Saves the Day
In sharp contrast to the weak overall employment picture, job creation by Temporary Help Services was robust. Consider:
- New temp positions constituted 40,400 of the 74,000 new jobs, or 55% of the total
- In 2013 overall, temporary labor employment created 11.3% of all new jobs
- Temporary employment reached 2.8 million in December, a record high resulting from 15 months of consecutive increases
- Temporary positions have risen to 2.06 percent of all non-farm jobs, the highest percentage ever seen in the US job market
The trend of recent BLS revisions to temporary employment reports has been upward:
US business reliance on temporary labor continues to increase; it is a distinct feature of the post-recession job market. The desire to keep flexibility in labor costs and the increasing regulatory and administrative burden placed on employers make the trend toward reliance on contingent labor very likely to continue in 2014.
The connection between the employment report and Federal Reserve monetary policy has been a prominent theme for many months. Several sources also cited harsh winter weather as a potential contributor to the low new job figure.