Experts See Downturn in Job Momentum
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IRVINE, CA-Despite a pick-up in nationwide job gains in the fourth quarter of 2013, December’s numbers fell short of expectation, causing experts to believe that a decline in labor-force participation is the more significant trend. The Bureau of Labor Statistics reported that 74,000 jobs were added in December, bringing the average monthly gain for the year to 182,000—similar to 2012 statistics.
Peter Muoio, senior associate and economist with Auction.com Research, says the headlines are focusing on the unemployment rate, which fell below 7% to 6.7% during December, rather than the labor-force participation rate. “This brings unemployment close to the 6.5% level the Fed has noted as a point to start raising interest rates, but the composition of this decline will give the Fed pause. The fall in unemployment was caused by a nose-dive in labor-force participation.”
After ticking higher last month, labor-force participation fell once again to its cyclical lows of 62.8% in December, Muoio adds. “While some in the media pin this on retirement and demographics, which certainly plays a minor role, the fact remains that declining labor-force participation points to a weaker economy and labor market than the headline figures indicate.”
As GlobeSt.com reported last week, Rick Sharga, EVP of Auction.com, said he believes the unemployment rates are a bit misleading since many among the unemployed are no longer looking for work. “A lot of people have voted themselves off the island and have taken themselves out of the labor pool. I’m watching labor-participation rates more than unemployment rates. Until we see ongoing creation of full-time, good-paying jobs, we’re not going to see housing coming back.”
Sharga added that one of the biggest problems in the unemployment realm is that 25- to 30-year-olds are continuing to have a stubbornly high unemployment and underemployment rates. “These should be first-time homebuyers to stimulate the whole ecosystem. I don’t see where we would get a significant boost to economic growth in 2014. It’s more likely we’ll continue to see a modest recovery, but at least it’s heading in the right direction, where we’ve been for the last couple of years. The economy, like housing, is finding its way out of the deep hole it carved for itself a few years ago.”
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