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Payrolls Increase in December; another 525,000 Removed from Labor Force Roll
Monday, January 13, 2014 6:55 AM

The Labor Department reported non-farm payrolls increased 74,000 in December, the lowest monthly gain in three years. In a separate survey, the nation’s unemployment rate dropped from 7 percent to 6.7 percent. While the number of long-term unemployed (27 weeks or longer) fell to 3.8 million, the ratio to total number of unemployed increased to 37.5 percent. The underemployment rate (unemployed, those working part-time but desiring full-time, and those deferring their current search) was unchanged at 13.1 percent of the labor force, or 20.3 million people.

According to the report, the civilian labor force declined by 347,000 people in December, 63 percent of the overall 548,000 decline in the labor force during 2013. The report also shows an additional 525,000 people were removed from the labor force rolls in December, bringing the total number removed over the past 12 months to 2.9 million. For all of 2013, the economy added 2.2 million jobs, virtually equaling 2012’s gain.

The labor force participation rate (labor force-to-total population) dropped from 63 percent to 62.8 percent, the lowest rate in more than three decades.

While the drop in the unemployment rate to 6.7 percent gives the impression the nation’s employment sector is improving, Brian Turner, director and chief strategist with Catalyst Strategic Solutions, says the underlying data tells another story, particularly in how it relates to consumer spending behavior.

Whereas 2.2 million jobs were created last year, Turner says it simply equaled 2012’s gain, and the percent of those employed relative to the total U.S. population has remained virtually unchanged since 2010. The latest report on GDP shows the economy expanded +4.1 percent during the third quarter of 2013. However, most of the improvement came from a +17 percent increase in business investment, while consumer spending increased a modest +2 percent. In fact, the current growth pace in consumer spending is the same as when the nation’s unemployment rate was 8.8 percent.

“As a result, member spending behavior remains fragile and with mortgage loan demand expected to decline in 2014, loan growth will remain a challenge for most of the industry’s credit unions this year,” Turner says.