U.S. Unemployment Rate Falls to Five-Year Low of 6.7% in December but Payroll Gains Weaken
The Bureau of Labor Statistics reported today that the U.S. unemployment rate fell to 6.7 percent in December. As the following chart shows, unemployment has not been that low since October 2008, more than five years ago. According to the household survey, on which the unemployment rate is based, the number of unemployed workers decreased by 490,000 in the month. The labor force decreased by 347,000 workers, leaving a net increase of 143,000 employed workers.
The BLS also tracks the number of nonfarm payroll jobs, based on a separate survey of employers. Payroll job gains for December, at 74,000, were the weakest for the year. Goods-producing industries lost 3,000 jobs, mostly because of a decline in construction activity. Manufacturing gained 9,000 jobs. Private service sector jobs rose by 90,000. Government jobs decreased by 13,000 for the month. The weak job numbers for December were partly offset by an upward revision of 38,000 to job growth previously reported for November.
Long-term unemployment has been unusually high throughout the recession and recovery. The number of job seekers who were out of work for 27 weeks or longer rose to 37.7 percent of the labor force in December. The latest uptick will add pressure on Congress for another extension of long-term unemployment benefits. Still, although the increases over the past two months have erased part of the gains achieved earlier in the year, long-term unemployment remains below its level of a year ago.
The number of people working part-time for economic reasons rose slightly in December. These people, sometimes referred to as involuntary part-time workers, include people working in jobs that would normally be full time, but whose hours have been cut because of slack demand, and also people who would prefer full-time work but who cannot find it. As the next chart shows, involuntary part-time employment, as a percentage of the labor force, has been essentially flat for the past two years. Trends in part-time work will be worth watching closely during the coming year, for reasons I will explore in a separate post.
Despite the substantial drop in the headline unemployment rate, the mixed nature of today’s report on the employment situation will temper some of the recent optimism about the growth prospects of the U.S. economy for 2014. The next major report, the advance estimate for fourth quarter GDP, due out later this month, should help clarify the situation.
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