U.S. economy adds 74K jobs, rate falls to 6.7 percent

The nation’s unemployment rate plunged from 7 percent to 6.7 percent last month as Americans continued to drop out of the labor force while some found jobs, the Labor Department reported Friday morning.

Employment growth during the holiday month, at 74,000, was the weakest in three years, although businesses created 38,000 more jobs during October and November than were previously detected by the department. The monthly job gain in December was well below the 182,000 average for 2012 and 2013 and less than half of what most economists were predicting.

The big drop in unemployment occurred largely because 347,000 unemployed workers suspended their search for jobs and dropped out of the labor force, according to the department’s household survey, possibly because of unusually cold weather or because many did not expect to find work during the holidays.

That brought the share of Americans participating in the job market down to 62.8 percent, the lowest since 1978. Only 143,000 people surveyed, by contrast, said they found jobs during the month.

“It’s a flat-out disappointing jobs report,” said Justin Wolfers, economics professor at the University of Michigan. “We were hoping the labor market had turned the corner. This report says it hasn’t.”

Many Wall Street economists had been looking for a pickup in job growth amid other signs that the economic recovery was gathering speed, so the sharp slowdown in job growth is likely to precipitate a big reaction in global financial markets. Bond yields and the dollar immediately dropped on the news.

Looking at the big picture, with monthly job growth average nearly the same amount between 2011 and 2013, the report suggests there has been virtually no acceleration in the U.S. economic recovery for three years.

“It’s a stunningly steady-as-she-goes recovery,” Mr. Wolfers said. Job gains for the full year 2013 were 2.2 million, nearly the same as 2012, the department said.

Besides tepid job growth, the report showed other weakness in the job market during December. The average workweek shrank by 0.1 hour to 34.4 hours, while the gain in average hourly earnings over the last year fell back to 1.8 percent after rising to 2.1 percent in previous months.

As might be expected during the Christmas season, the strongest growth in jobs was in retail, though retailers reported only tepid holiday sales last year.

“We’re not out the economic woods yet,” said Jared Bernstein, a former White House economist. “One bad report — a report subject to considerable revisions — doesn’t change everything, but these numbers provide a stark reminder that this economic recovery has been fraught with head fakes.”

Since the middle class and poor depend on wages for income, while the wealthy get most of their income from the soaring stock market, the report was “a sign of the inequality that pervades the U.S. economy,” he said. “We’ve not yet seen overall [growth] or profit growth reach working families in a consistent manner.”