The most recent release of the Employment Situation Summary, which provided less-than-inspiring jobs data from December 2013, has brought about more questions than answers regarding the state of the economy's recovery.
According to the U.S. Bureau of Labor Statistics, the national unemployment level declined from 7 percent in November to 6.7 percent in December. However, that 0.3 percent fall belies the progress - or lack thereof - exhibited in the labor market as the year came to a close. The reduced rate of joblessness was attributed primarily to the number of Americans who abandoned their job searches - and therefore were not counted as unemployed - and the 74,000 total nonfarm payroll positions added during the month were well short of most economists' expectations.
Among the primary questions moving forward is how the alarmingly slower rate of progress will affect the Federal Reserve's plans for stimulus spending. After months of speculation and rumor, the central bank finally decided to taper its quantitative easing program by $10 billion per month beginning in January, a decision largely influenced by the 200,000-plus jobs added in November. With unemployment down to 7 percent and economists' estimates calling for another 193,000 positions to be added in December, the Fed's rationalization was that the economy was exhibiting the ability to sustain itself, thereby justifying the reduced rate of spending.
Now, with December data falling woefully short of those projections, the questions center around whether the employment figures are a function of seasonal aberrations or if the Fed may have pulled the trigger on tapering too early.
What's the true trend?
The labor force participation rate, a figure that serves to gauge the number of adults who are either employed or actively seeking employment, fell to 62.8 percent, a figure that represents the lowest level seen since 1978. While extreme cold and storms affecting the Northeast and Midwest may have contributed to disappointing jobs gains in sectors like construction, there remain concerns about the effects such uneven growth will have on the housing market in 2014.
Paul Ashworth, the chief U.S. economist at Capital Economics, noted that the especially harsh December weather led to some 273,000 people reporting an inability to work for various stretches during the month. By comparison, only 37,000 people reported being unable to work because of weather conditions in November, Forbes reported.
"That doesn't mean we can mechanically translate that into a 110,000 hit to payrolls, however, because the payroll survey still counts workers as employed as long as they were paid for one day in the sample period, regardless of whether they physically turned up," Ashworth said. "Nevertheless, it's normally a pretty good indication. The 16,000 decline in construction payrolls and the dip in average weekly hours worked are also indications that bad weather played a role."
In addition to construction, sectors that experienced significant reductions in employment levels included information, which lost 12,000 jobs in December, and health care, which saw employment reduced by 6,000 positions. The retail trade sector saw the most significant surge in employment, adding 55,000 jobs amid the holiday season sales rush, while notable gains were also seen in professional and business services (19,000 positions added), information (12,000 added) and manufacturing (9,000 added) sectors.
In all, there were approximately 2.2 million jobs added over the course of 2013 - a figure on par with the employment gains seen in 2012. And while the number of unemployed persons declined by 490,000 in December, per BLS data, there remain 10.4 million jobless Americans and the 6.7 percent rate of unemployment remains well above pre-recession levels.
Where to go from here?
With Fed Chairman Ben Bernanke being relieved of his post by the recently appointed Janet Yellen, many analysts - within the housing finance industry and elsewhere - will again turn their attention toward the Fed's plans for stimulus spending. Bernanke leaves with his goals for employment levels unmet, and all early indications have been that Yellen will proceed with a reduced rate of quantitative easing.
Bernanke has been adamant that 6.5 percent unemployment - a figure closer to being attained each month - would not in itself trigger further reductions in spending. Jobs data would have to show improvement in all the right areas, and other economic figures will continue to contribute to the Fed's plans.
"[Only if unemployment] dips below 6.5 percent for the right reasons, not just because of the decline in labor force participation," Mark Hamrick, Washington bureau chief at Bankrate, told Forbes. "It would take several more months of either very weak payroll job numbers, or even bigger drops in the unemployment rate for the right reasons such as huge increases in jobs before the Fed would want to deviate from its $10 billion taper."
Until then, the waiting game resumes - with the housing market among the most affected sectors - as the economy continues to try and sustain itself with mixed results.