Thread: Payrolls fall by 85,000 after small gain in November

Jan. 8, 2010, 10:11 a.m. EST

Payrolls fall by 85,000 after small gain in November

Discouraged workers drop out of labor force, keeping jobless rate at 10%

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By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) -- U.S. job losses resumed in December while the unemployment rate was steady at 10% on a huge decline in the number of people looking for work, the Labor Department estimated Friday.

Nonfarm payrolls fell by a seasonally adjusted 85,000 in December following a revised 4,000 gain in November, which was the first increase in payrolls since December 2007. During 2009, payrolls fell by 4.2 million.

The official unemployment rate remained at 10% in December as the labor force contracted by the largest amount in nearly 15 years. Read the full report on the Labor Department Web site.

After averaging nearly 700,000 a month in the first quarter of 2009, job losses decelerated to an average of 69,000 in the fourth quarter.

But, "there is still plenty to be concerned about," wrote Mark Vitner, an economist for Wells Fargo Securities. "Layoffs have clearly slowed but hiring shows few signs of accelerating."



Details of the December report were generally weak, with few signs of further improvement in labor conditions. One bright spot: temporary-help jobs rose for the fifth month in a row, gaining 46,500.

However, fewer industries were hiring in December than in October, and the number of discouraged workers rose by 287,000 over the year to 929,000. The employment-participation rate fell to a 25-year low 64.6% from 64.9% as the labor force fell by 661,000, the largest decline in nearly 15 years.

"If these workers had been in the labor force unemployed, the unemployment rate would have risen to 10.4%," wrote Heidi Shierholz, a labor economist for the Economic Policy Institute.

"The decline in the labor force in the past year (-1.0%) is the largest in nearly six decades, and the eventual return of discouraged job seekers will likely keep the jobless rate high well into 2010," wrote Sal Guatieri, an economist for BMO Capital Markets.

Total hours worked in the economy were unchanged in December. The average workweek was unchanged at 33.2 hours, near the record low. "Firms have plenty of scope to expand hours before adding new workers," Guatieri said.

An alternative gauge of unemployment, which includes discouraged workers and those forced to work part-time, rose to 17.3% from 17.2%.

The report was weaker than expected by economists surveyed by MarketWatch, who were looking for 15,000 more jobs and an increase in the unemployment rate to 10.1%. See the Economic Calendar.

Average hourly earnings rose 3 cents or 0.2%, to $18.80. Average hourly earnings are up 2.2% in the past year, similar to the rise in consumer price inflation.

More details

Since the recession began two years ago, payrolls have fallen by 7.3 million. Next month, the government will incorporate annual benchmark revisions that will likely push the total jobs lost to more than 8 million.

In its survey of 400,000 business establishments, the government found that employment fell by a seasonally adjusted 85,000 to 130.9 million in December. Government employment fell by 21,000, the majority at the post office and in local government outside of schools.

Employment in the goods-producing sector fell by 81,000, including 53,000 in construction and 27,000 in manufacturing. The average workweek in manufacturing was unchanged at 40.4 hours. Of 83 manufacturing industries, 39.8% were hiring, the highest since May 2008.

Service-producing jobs in the private sector rose by 25,000, including 10,000 in retail. Services had added 62,000 jobs in November. "There does seem to be some positive momentum in the service sector," wrote Julie Coronado, an economist for BNP Paribas.

Temp-help jobs increased by 46,500, the fifth increase in a row. Health care added 25,000 jobs. Finance added 4,000 jobs. Professional and business services added 50,000 jobs. Leisure and hospitality industries cut 25,000 jobs.

Of 271 industries, 40% were hiring in December, down from 42.4% in November.

Payroll revisions were minor, with total payrolls revised down by 1,000 for October and November. October's loss was revised to 127,000 from 111,000, while November's loss of 11,000 was revised to a gain of 4,000.

A separate survey of households showed employment fell by a seasonally adjusted 589,000 in December and unemployment fell by 73,000 to 15.3 million. About 661,000 people dropped out of the workforce, driving the employment participation rate down to 64.6%. The employment-population ratio dropped to 58.2%, the lowest since 1983.

For the first time ever, fewer than two-thirds of adult men are working, with the employment-population ratio dropping to 66.3%. Only about a quarter of teenagers are working.

Due to changes in seasonal adjustment factors for the household survey, the peak unemployment rate in October of 10.2% was revised to 10.1%, still a 26-year high.

The number of people who've been unemployed for longer than six months rose by 229,000 to 6.13 million, representing a record 39.8% of 15.3 million who are classified as unemployed.

Rex Nutting is Washington bureau chief of MarketWatch.

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Total unemployment, including those forced into part-time jobs, is approaching 20 percent. This suggests that employers are not seeing the profit opportunities that would justify new hires in the coming months or years.

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