Employers in the U.S. added fewer jobs than forecast in December, confirming Federal Reserve Chairman Ben S. Bernanke’s view that it will take years for the labor market to heal.
Payrolls increased 103,000, compared with the median forecast of 150,000 in a Bloomberg News survey, Labor Department figures showed today in Washington. Employment the prior two months rose more than initially estimated. The jobless rate fell to 9.4 percent, partly reflecting a shrinking workforce.
Faster job growth is needed to keep consumers spending and ensure a self-sustaining recovery in the world’s largest economy. Bernanke, in Senate testimony an hour after the report, said it may take four or five years for the labor market to “normalize fully,” indicating no change in the Fed’s plans to pump $600 billion into the financial system.
“We’re moving in the right direction, but we won’t get out of the hole anytime soon,” said Jay Feldman, an economist at Credit Suisse in New York. “For the Fed, it means steady as she goes.”
Stocks fell, trimming the market’s sixth weekly gain. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,271.5 at the 4 p.m. close in New York. The yield on the 10-year Treasury note declined to 3.32 percent from 3.40 percent late yesterday.
Estimates for the change in payrolls among 78 economists surveyed by Bloomberg ranged from 98,000 to 240,000. The median climbed from 140,000 at the start of the week after projections from ADP Employer Services showed companies boosted employment by 297,000 workers last month.
The unemployment rate was forecast to fall to 9.7 percent from 9.8 percent, according to the median prediction of 73 economists. Estimates ranged from 9.5 percent to 9.9 percent.
“It’s about what we expected,” Bernanke said of today’s Labor Department data in response to questions from the Senate Budget Committee. “If we continue at this pace we’re not going to see sustained declines in the unemployment rate.”
For all of 2010, about 1.1 million jobs were created, the most since 2006. The jobless rate averaged 9.6 percent, the highest since 1983 and up from 9.3 percent a year earlier. With today’s report, the Labor Department revised figures from its household survey used in calculating the unemployment rate going back five years. Benchmark revisions to the payroll data will be announced in February.
“The decline in the unemployment rate is positive news but it only underscores the importance of us not letting up on our efforts,” President Barack Obama said in Landover, Maryland during a visit to Thompson Creek Manufacturing, a maker of windows and doors that has added workers partly because of administration tax incentives.
Unemployment stuck above 9 percent is one reason why Obama last month signed an $858 billion bill extending all Bush-era income-tax cuts for two years. The bill also continues expanded unemployment insurance benefits through 2011 and cuts payrolls taxes by 2 percentage points.
Retailers and automakers are among industries hiring.
Dollar General Corp., the biggest of the U.S. dollar discount stores, plans to add 6,000 jobs as it opens 625 more stores in fiscal 2011. By the end of 2011, the Goodlettsville, Tennessee-based discounter said last month it will have created 15,000 jobs since 2009.
Ford Motor Co., the world’s most profitable automaker, is hiring 1,800 workers and spending $600 million to overhaul a factory in Louisville, Kentucky, to build small sport-utility vehicles, Marcey Evans, a Ford spokeswoman, said in an interview last month.
Manufacturing payrolls rose by 10,000 in December, today’s report showed. Economists had projected an increase of 5,000.
Consumer spending, which accounts for about 70 percent of the economy, has picked up. Holiday purchases rose 5.5 percent, the best performance since 2005, said MasterCard Advisors’ SpendingPulse, which measures retail sales by all payment forms. That compared with a 4.1 percent gain a year earlier. The numbers include Internet sales and exclude automobile purchases.
“While it appears that the economic environment has stabilized and is perhaps improving, persistent high unemployment and uncertainty in the economy could continue to pressure consumers and affect their spending,” Steven Temares, chief executive officer at Union, New Jersey-based Bed Bath & Beyond Inc., said on a teleconference with analysts Dec. 22. Still, “we remain cautiously optimistic,” he said.
Employment at service providers increased 105,000 in December. The number of temporary workers rose 16,000, the smallest gain since October 2009. Construction companies reduced payrolls by 16,000, the most since May, and retailers added 12,000 workers.
Government payrolls decreased by 10,000. State and local governments reduced employment by 20,000, while the federal government added 10,000 jobs.
States and municipalities with growing budget gaps are cutting spending and reducing headcount. Florida may cut 5 percent of its state workforce to save costs, Governor-elect Rick Scott said in an interview Dec. 3 on Bloomberg Television’s “InBusiness With Margaret Brennan.”
November employment rose 71,000, more than an initially reported gain of 39,000. Payrolls in November and October combined were 70,000 more than previously estimated.
The workforce shrank by 260,000 workers last month, sending down the share of the population in the labor force to a 26-year low of 64.3 percent. The number of people unemployed for 27 weeks or more increased as a percentage of all jobless, rose to 44.3 percent.