IBJNews

Fears of slowdown sharpen focus on U.S. jobs report

Back to TopCommentsE-mailPrintBookmark and Share

Fears of an economic slowdown are heightening anticipation of what Friday's U.S. jobs report for January might reveal.

Stock markets have sunk after signs of weaker growth in the United States, Europe and China. Turmoil in developing countries has further spooked investors. The upheaval has renewed doubts about the Federal Reserve's next steps.

Evidence of healthy U.S. job growth would help soothe those jitters. It would suggest that the world's biggest economy is still expanding solidly enough to support global growth.

"The best antidote right now for all these problems is a robust U.S. economy," said Carl Riccadonna, an economist at Deutsche Bank. "The whole world is watching, even more so than usual."

Yet anyone looking to Friday's report for a clear picture of the U.S. economy's health might be disappointed. Unseasonably cold winter weather could distort January's hiring figures. Revised estimates of job growth last year and the size of the U.S. population might further skew the data.

Another complication: A cutoff of extended unemployment benefits in December might have caused an artificial drop in January's unemployment rate and perhaps a misleading snapshot of the job market's health.

"Just when we need it most, the employment report may fall short," Riccadonna said.

All the anxiety marks a reversal from a few weeks ago, when most analysts were feeling hopeful about the global economy. U.S. growth came in at a sturdy 3.7 percent annual pace in the second half of last year. The Dow Jones industrial average finished 2013 at a record high. Europe's economy was slowly emerging from a long recession. Japan was finally perking up after two decades of stagnation.

Yet in just the past few weeks has come a barrage of dispiriting economic news. U.S. hiring slowed sharply in December. Employers added just 74,000 jobs, barely a third of the average gain in the previous four months.

On Monday, an industry survey found that manufacturing grew much more slowly in January than in December. A measure of new orders in the report plummeted to the lowest level in a year. That report contributed to a dizzying 326-point plunge in the Dow Jones industrial average.

Also Monday, automakers said sales slipped 3 percent in January. And last week, the government said orders to U.S. factories fell in December. So did signed contracts to buy homes, according to the National Association of Realtors.

A gauge of China's manufacturing fell to a six-month low in January. And a report Wednesday said retail sales in the 18 European countries that use the euro fell in December by the most in 2½ years.

For all that, most economists remain relatively optimistic about U.S. growth. They attribute the recent weakness in the United States in part to unseasonably cold weather, which disrupted trucking and shipping. The weather might have lowered hiring in December by up to 50,000 jobs, according to several economists' estimates. Few Americans want to test-drive cars or search for a new home in poor weather.

"I think the US economy is still doing just fine," said Bob Baur, chief global economist at Principal Global Investors. "Maybe people are overreacting a bit."

Baur still thinks U.S. growth will come in at nearly a 3 percent pace this year. That would be the best showing since 2005.

Growth at that level would also be enough for the Fed to continue winding down its monthly bond purchase program, Baur said. The Fed is buying $65 billion in bonds this month to try to keep interest rates low and encourage borrowing and spending. It has pared those purchases from $85 billion in December. Fed officials have said they will likely end the purchases by year's end if the economy improves further.

Some positive signs have emerged. A survey of service sector companies, including retailers, banks and restaurants, found that they grew faster in January than in December. The service companies, which represent about 90 percent of all private firms, also stepped up hiring, the survey found.

And payroll processor ADP said Wednesday that businesses added 175,000 jobs in January. That's roughly in line with the average monthly gains of the past two years. It suggests that hiring could have rebounded a bit from December's disappointing result. Still, ADP's figure was also lower than the 227,000 jobs it said were added in December.

Yet ADP's figures cover only businesses and frequently diverge from the government's more comprehensive count.

Another unknown is the effect of the expiration of emergency unemployment benefits on Dec. 28. Benefits for about 1.4 million unemployed were cut off. Many of those people might have given up on their job searches in January. They had been required to look for work to receive benefits.

People out of work aren't counted as unemployed unless they're actively seeking work. If many people stopped looking for a job last month after their benefits ran out, the number of unemployed would fall. And so would the unemployment rate.

There's no way to know how all these different trends will affect Friday's report.

"We view this month's (jobs) results as pretty much of a crapshoot," said Joshua Shapiro, an economist at MFR Inc., a forecasting firm.

ADVERTISEMENT

  • Rich get richer
    The economy does seem to be growing. The upper 1% are making more than ever. However those at the bottom are making less and less. The American dream is rapidly becoming a nightmare.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Thank you to the scientists who care enough to find a cure. We are so lucky that their intelligence has brought them to these understandings because it is through these understandings that we have new hope. Certainly the medicine will be expensive, these drugs usually are, especially the ones that are not mass produced. If I know anything from the walks that my town has put on for FA it is this: people care and people want to help. Donations and financial support can and will come to those who need it. All we need is a cure, the money will come. I mean, look at what these scientists have done thanks to the generosity of donors. 30 million dollars brings us here where we can talk about a drug's existence! There is so much to be frustrated about in this world, but this scientific break is not one of them. I am so happy for this new found hope. Thank you so much to the scientists who have been slaving away to help my friends with FA. We wish you speedy success in the time to come!

  2. I love tiny neighborhood bars-- when I travel city to city for work, it's my preference to find them. However, too many still having smoking inside. So I'm limited to bars in the cities that have smoking bans. I travel to Kokomo often, and I can promise, I'll be one of those people who visit the ma and pa bars once they're smoke free!

  3. I believe the issue with keystone & 96th was due to running out of funds though there were other factors. I just hope that a similar situation does not befall ST RD 37 where only half of the overhaul gets built.

  4. It's so great to see a country founded on freedom uphold the freedom for all people to work and patronize a public venue without risking their health! People do not go to bars to smoke, they can take it outside.

  5. So, Hurko, mass transit has not proven itself in Indy so we should build incredibly expensive train lines? How would that fix the lack of demand? And as far as those double decker buses to bus people in from suburbs, we can't fill up a regular sized buses now and have had to cancel lines and greatly subsidize others. No need for double decker buses there.

ADVERTISEMENT