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Employers Cut 85,000 Jobs in December

Source: WSJ

Posted on 08 Jan 2010

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U.S. job losses were higher than expected in December of last year and the unemployment rate remained at a lofty 10%, a sign the labor market has still some way to recover.

Although the November 2009 data was revised to show the U.S. economy added jobs for the first time since the recession began two years earlier, the December payroll number was worse than forecast.

Nonfarm payrolls fell by 85,000 last month, compared with a revised 4,000 gain in November, the Labor Department said Friday.

Economists surveyed by Dow Jones Newswires had expected a payroll decrease of just 10,000. The November figure originally showed an 11,000 drop in payrolls.

The unemployment rate, calculated using a survey of households as opposed to companies, remained at 10% in December, the same level as the previous month. Economists had forecast the jobless rate would edge higher to 10.1%.

Employment fell in construction, manufacturing, and wholesale trade, while temporary help services and health care continued to add jobs.

Even though the payroll number was worse than expected, the data reflects an improvement in the jobs market. Job losses have been moderating substantially during 2009 as the U.S. economy recovered from its worst recession in decades.

In the fourth quarter of 2009, employment losses averaged 69,000 per month, compared to job losses of 691,000 a month in the first quarter of last year. Employment in construction fell by 53,000 in December, while manufacturing jobs fell by 27,000. Temporary help services added 47,000 jobs in December and health care employment continued to increase, by 22,000. Ahead of the release, analysts warned against reading too much into one piece of data. "The number, as reported, is revised no less than three times, often showing a final number that bears little resemblance to the originally reported figures" said Dan Greenhaus, chief economist at Miller Tabak & Co. The Federal Reserve's view that U.S. interest rates must remain at a record low for several more months isn't expected to change following the December jobs report. The central bank's rate-setting committee left interest rates close to zero mid-December in the face of low inflation and still-high unemployment. Since the financial crisis began in 2007, the Fed has slashed its benchmark lending rate from a peak of 5.25%. Minutes of last month's meeting, released earlier this week, showed that Fed officials remained worried about the labor market's weakness. "Several participants observed that more than one good report would be needed to provide convincing evidence of recovery in the labor market," the December minutes showed. Fed officials have predicted the unemployment rate will average between 9.3% and 9.7% in the fourth quarter of 2010 due to a slow recovery. The U.S. economy is expected to have expanded at a healthy pace in the second half of 2009, but the jobs market's weakness, tight bank lending and a fading government stimulus is seen keeping the recovery contained.