WASHINGTON, (Reuters) – U.S. job creation slowed sharply over the past two months, turning in the weakest performance in three years and raising the prospect that the economy may be losing momentum.
At the same time, however, the unemployment rate hit a new five-year low of 6.6 percent in January even as Americans piled back into the labor market to search for work.
The Jekyll and Hyde report from the Labor Department yesterday whipsawed U.S. markets in early trade. Many economists cautioned against reading too much into it given the extreme weather that has hit much of the nation this winter.
“It supports the view that momentum is slowing in the first quarter, but it’s too early to draw conclusions and we should not be too pessimistic either,” said Thomas Costerg, a U.S. economist at Standard Chartered Bank in New York.
Nonfarm payrolls rose only 113,000 last month after a meager 75,000 gain in December, the report showed. Economists had expected payrolls to rise 185,000 in January and had looked for a big upward revision to December.
Instead, December’s figure was revised upward by just 1,000, although November’s count was raised by 33,000 to 274,000, the biggest gain since February.
Taken together, job growth averaged just 94,000 in December and January, a big slowdown from the 204,000 average for the first 11 months of last year.
While weather was believed to have weighed on hiring in December, it did not appear to be a major factor last month.
There were strong gains in the weather-sensitive construction sector, and while a survey of households found 262,000 Americans were unable to work due to the weather, the department said that was in line with historical trends.
The second straight month of weak hiring – marked by declines in retail, utilities, government, and education and health employment – could be a problem for the Federal Reserve, which is scaling back its monthly bond-buying stimulus program.
However, its next policy-setting meeting is not until March 18-19. By then, the economic clouds may have cleared.
Most economists stuck to predictions that the central bank would cut its monthly purchase pace by another $10 billion in March, as it did last month and the month before.
“We don’t think the January report is enough by itself to stop the Fed from tapering again,” said Julia Coronado, chief North America economist at BNP Paribas.
