Despite expectations to the contrary, the monthly change in employment fell short of even the most pessimistic market forecasts. Total employment rose by just 74,000 jobs in December, far south of the nearly 200,000 expected, with retail hiring accounting for 55,000 jobs, or ¾ of the increase. Private sector jobs rose by 87,000, while office-using employment increased by 11,000—a fraction of the 62,000 average monthly increase observed over the prior 12 months (Table 1).
Employment in the Information sector fell by 12,000, largely on the back of a decline in ―motion picture and sound recording industries,‖ which can be a volatile category. Hiring in Financial Activities (up by 4,000) was muted, with commercial banks, as but one example, reducing their headcount by over 5,000 employees
Payrolls in the Professional/Business Services sectors rose by 19,000—the smallest increase in 15 months and well below the monthly average increase of 54,000 from December 2012 – November 2013. Accounting and bookkeeping services employment plummeted by nearly 25,000—the largest decline in more than a decade—a major reversal for an industry that had added 37,000 jobs from January through November of this year. In contrast, temporary help employment surged, rising by 40,000 for the largest monthly increase in almost two years.
Further decline in labor force participation rate belies drop in the unemployment rate to five-year low
For every article that cites the decline in the unemployment rate as a sign of an improving economy, another highlights the fact that the decline merely reflects an increase in jobless workers choosing to leave the workforce entirely. (If a jobless person hasn’t actively searched for a job within the last four weeks, he or she is not considered unemployed and is not included in the unemployment rate calculation.)
The labor force participation rate has fallen for every age cohort (Chart 2), suggesting that it is not merely the aging of the population or the inability of younger workers to find jobs that has been behind the decline. Moreover, if the population grows with time, a sufficiently large increase in the population, coupled with a decline in the labor force participation rate, could result in the level of the overall labor force actually growing.
Unfortunately, the population of one of the prime working-age cohorts, 35-39 year olds, shrank in absolute size from December 2009 – December 2012 (2013 data are not yet available.) With a reduction in population and a reduction in the labor force participation rate, the overall size of the 35-39 year old labor force declined by 6.7%* between 2009 and 2013, resulting in the loss of more than 1.1 million workers with the highest propensity to work—a non-trivial decline.
*2009 and 2013 averages