|BN 08:30 U.S. Payrolls Rose 18,000 in December; Jobless Rate at 5.0%
By Bob Willis
Jan. 4 (Bloomberg) -- Hiring in the U.S. slowed more than
forecast in December and unemployment jumped to a two-year high,
raising the odds the Federal Reserve will need to cut interest
rates more than anticipated to ward off an economic slowdown.
Payrolls rose by 18,000 after a 115,000 gain in November
that was larger than initially reported, the Labor Department
said today in Washington. The jobless rate rose to
5.0 percent, the highest since November 2005, from 4.7 percent in
The monthly payroll gain, the smallest since August 2003, is
the clearest sign yet that the U.S. expansion is at risk amid
tighter credit, a deeper housing slump and a stumbling stock
market. Fed policy makers last month lowered growth forecasts and
said they were concerned a ``marked deceleration'' in spending
could hurt the economy, according to meeting minutes.
``The labor market is loosening up and bodes poorly for
consumer spending,'' Dana Saporta, an economist at Dresdner
Kleinwort in New York who had forecast a gain of 40,000, said
before the report. ``Certainly a slowing labor market would add
to the risk of recession.''
Economists surveyed by Bloomberg News had forecast an
increase of 70,000 in payrolls, according to the median of 74
estimates, compared with an originally reported gain of 94,000
in October. Predictions ranged from 34,000 to 106,000.
Year's Payroll Gains
The December job gain puts the total payroll increase for
2007 at 1.33 million, the fewest in four years. The jobless rate
stood at 4.5 percent at the end of 2006.
The figures, which show that private payrolls shrank in
December while government jobs increased, corroborate a private
survey yesterday that suggested the job market was cooling.
Companies hired 40,000 additional workers in December, according
to data compiled by ADP Employer Services. The figures include
only private employment and don't take into account hiring by
The unemployment rate for 2007 averaged 4.6 percent,
unchanged from 2006. The last time the jobless rate rose more in
a single month was April 1995.
Service industries, which include banks, insurance
Companies and restaurants, added 93,000 workers last
month after gaining 160,000 jobs in November. Retail employment
declined by 24,300 after increasing 32,000 in November.
Factory Payrolls Decline
Factory payrolls decreased by 31,000 after falling 13,000 a
month earlier. Economists had forecast a drop of 15,000 in
manufacturing employment. Builders reduced payrolls by 49,000
after cutting 37,000 jobs in November.
Government payrolls increased by 31,000 during the month,
indicating private payrolls declined by 13,000.
Residential construction started dropping at the start of
2006, weakening job growth as builders, mortgage companies and
manufacturers reduced staff.
The collapse of the subprime mortgage market in July and
August hastened firings at financial companies. National City
Corp., Ohio's largest bank, said this week it would eliminate
another 900 jobs, bringing total cuts to 3,400, or about 10
percent of its workforce, in one year.
The housing market ``corrected with a high degree of
suddenness,'' Chief Executive Officer Peter Raskind said in an
interview on Jan. 2.
Manufacturers are also cutting back as sales of building
materials, appliances and furniture weaken, reflecting a 34
percent slump in combined new and existing home sales from their
July 2005 peak.