Payrolls in U.S. Drop 85,000, with Jobless Rate at 10%
By Bob Willis
[Bloomberg] -- The U.S. unexpectedly lost 85,000 jobs in December and revisions showed payrolls increased the prior month for the first time in almost two years, indicating improvement in the labor market will be halting.
Payrolls decreased last month after a November gain of 4,000, figures from the Labor Department showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected no change in December employment. The jobless rate held at 10 percent.
U.S. stock-index futures, Treasury yields and the dollar all fell on concern the recovery may weaken. The Obama administration, under pressure after about half of the 7.2 million jobs lost during the recession occurred since the president's inauguration, has announced additional measures to boost job growth. Federal Reserve Chairman Ben S. Bernanke has pledged to maintain record-low interest rates until joblessness subsides.
"There's still a bit of caution in hiring by businesses," said Michael Moran, chief economist at Daiwa Securities America Inc. in New York. "There were some positive things in the revisions to the prior month, but in general we're still in adjustment mode in the labor market."
Futures on the Standard & Poor's 500 Index fell 0.3 percent to 1,133.7 at 8:38 a.m. in New York. The yield on the 10-year Treasury note fell to 3.79 percent from 3.83 percent late yesterday. The dollar slid from a four-month high against the yen, dropping 0.8 percent to 92.67 yen from 93.37 yesterday.
Payrolls in construction dropped almost twice as much in December as a month earlier, which may have reflected colder and wetter weather. Manufacturing shed the fewest jobs last month since the recession began in December 2007.
Construction, Manufacturing
Revisions subtracted 1,000 from payroll figures previously reported for November and October. The November reading was revised to show a gain in jobs compared with an initially reported 11,000 decline.
Payrolls were forecast to be unchanged, according to the median estimate of 76 economists surveyed by Bloomberg News. Estimates ranged from a decrease of 100,000 to a gain of 85,000.
The jobless rate was projected to hold at 10 percent. Forecasts ranged from 9.9 percent to 10.2 percent.
Work Week
The average work week held at 32.2 hours in December, while average weekly earnings rose to $624.16.
Workers' average hourly earnings were 2.2 percent higher than December 2008.
The 7.2 million drop in payrolls over the past two years has been the biggest as a percentage of all jobs since World War II was ending in 1944-45.
Monthly payroll losses accelerated after the collapse of Lehman Brothers Holdings Inc. in September 2008 and peaked at 741,000 in January 2009.
Today's report showed factory payrolls declined 27,000 after decreasing 35,000 in the prior month. The median forecast by economists called for a drop of 35,000. The decline included a drop of 4,900 jobs in auto manufacturing and parts industries.
Sales of cars and light trucks increased for a third consecutive month in December after plunging in the wake of the government's so-called cash-for-clunkers incentive plan. Vehicles sold at an 11.2 million annual pace last month, up from a 10.9 million rate in November.
Construction Declines
Payrolls at builders fell 53,000 after decreasing 27,000. Financial firms increased payrolls by 4,000, after a 6,000 decrease the prior month.
Colder and wetter weather than average during the Dec. 12 survey week may have restrained the payroll numbers last month, compared with the unseasonably mild early November, Raymond Stone, managing director of Stone & McCarthy Research Associates in Skillman, New Jersey, said in a note to clients. "Weather-sensitive" industries such as construction and travel may see "weaker" payroll numbers, he said before the report.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 4,000 workers after adding 62,000 in November.
Payrolls increased at professional business services and education and health in the last two months. Retail payrolls decreased by 10,200 after a 13,500 decline.
Stimulus Plans
President Barack Obama on Dec. 8 proposed additional spending on the nation's transportation system, tax credits to spur hiring by small businesses and incentives to make homes more energy efficient in a second round of efforts to cut the jobless rate. In early 2009, the administration's economic advisers forecast the $797 million stimulus plan would keep unemployment below 8 percent.
In another government boost, the Census Bureau will hire 1.15 million temporary workers in the first half of the year to conduct the population count that takes place every 10 years. That hiring may boost payrolls by a peak of 700,000 in May before those workers begin getting dismissed in June, according to a forecast by economist Lori Helwing at BofA Merrill Lynch Global Research in New York.
"They're going to hire an army of people," said Julia Coronado, a senior economist at BNP Paribas in New York. "In some sense, this acts as a stimulus package and is a timely coincidence, coming so early in the recovery."
Government Jobs
Government payrolls decreased by 21,000 after a 4,000 gain the prior month.
The so-called underemployment rate -- which includes part- time workers who'd prefer a full-time position and people who want work but have given up looking -- rose to 17.3 percent from 17.2 percent.
The number of temporary workers increased 46,500 in December, the fifth straight gain. Payrolls at temporary-help agencies often turn up before total employment because companies prefer to see a steady increase in demand before taking on permanent staff.
Increases in temporary hiring are "a classic part of the recovery," Manpower Inc. Chief Executive Officer Jeffrey Joerres said in a Bloomberg Television interview Dec. 31.
The economy grew at a 2.2 percent annual rate in the third quarter, the first gain in more than a year. Economists at JPMorgan Chase & Co. (JPM) and Credit Suisse are forecasting fourth- quarter growth of more than 4 percent.
Projections
Economists surveyed by Bloomberg last month projected the jobless rate will exceed 10 percent through the middle of this year even as the economy expands 2.6 percent.
Some companies are still trimming payrolls. VolvoVOLVB:SS, the world's second-largest truck-maker, will shut a plant in Asheville, North Carolina, that makes earth-moving vehicles and eliminate about 228 jobs to restore profit at its construction- equipment unit, Gothenburg, Sweden-based Volvo said Dec. 11 in a statement.
The unit's "commitment to the U.S. market remains strong," and Volvo is sticking to investment plans for another site in Shippensburg, Pennsylvania, Olof Persson, the division's chief, said in the statement.
Among companies resuming hiring, Caterpillar Inc., the world's largest maker of bulldozers, aims to bring back some laid-off workers this year as sales improve, Chief Executive Officer Jim Owens said last month.
"We'll gradually begin to call people back and to rebuild our overall sales and ability to ship product," Owens said in a Dec. 11 interview with Bloomberg Television. "It will gradually begin to pick up as 2010 unfolds."
To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net
