Jobless Rate Falls -- But Too Early To Celebrate

The nation’s jobless rate fell to 9.4 percent in December -- its lowest level in two years. But the underlying numbers were less than had been hoped for and were not exactly reassuring.

“Despite the indications to the contrary, no light switch has been flipped as businesses continue to hire at a cautious pace,” said economist Joel Naroff of Naroff Economic Advisors, in Holland, Pa.

Previous indicators raised hopes that the December employment report from the U.S. Labor Department would show robust job creation. There was job creation, but it wasn’t exactly robust. The economy added 103,000 jobs in December -- far short of expectations.

“The details of the report support the view that businesses continue to hire but still see no reason to add lots of workers,” Naroff said.

Positive signs

But there were some encouraging signs. The employment increases last month were quite broad based, with 60 percent of the industries adding workers.  Manufacturing was positive as well. So was the service sector.

Weakness was reported in the usual places; construction and local governments.  The federal government added employees. The October and November numbers were revised upward by 70,000 and Naroff says it’s possible that might happen with December’s gain as well. 

“As for the unemployment rate, it was great to see it decline sharply, to the lowest level since May 2009,” Naroff said.  “It’s hard to know why that happened.” 

Naroff says the issue of long term unemployment compensation may have played a part in the huge move.  He said he wouldn’t be surprised to see the rate go back up in January.

There were minimal increases in wages and hours worked so personal income likely rose modestly as well, he said.

For the year as a whole, the economy added 1.1 million jobs. That’s the best one-year gain since 2007.