February 7, 2014 11:12 pm JST

US payrolls up 113,000 in January, well below expectations

WASHINGTON (Dow Jones) --The labor market in January registered weak gains for the second straight month, a slowdown that could heighten fears about the economic recovery and may lead some to call on the Federal Reserve to reconsider its strategy.

     U.S. payrolls increased by a seasonally adjusted 113,000 in January, the Labor Department said Friday. Job growth improved compared with December's gain, which was revised up by just 1,000 to 75,000, but was well below last year's average pace. The November increase was recast up by 33,000 to 274,000.

     The January gain is weak compared to the 200,000-plus jobs added on average between August and November.

     The unemployment rate, obtained through a separate survey, fell to 6.6% last month from 6.7% in December, the Labor Department said. The number of Americans who were employed and those part of the wider labor force both rose slightly.

     Economists had expected a gain of 189,000 jobs and a 6.6% jobless rate, according to a Dow Jones Newswires survey.

     December's weak payroll figure, and signs of weakness in the housing sector and emerging markets, sparked fears that 2014 could get off to a disappointing start.

     January's report may heighten the concerns.Consecutive weak employment reports could increase calls for the Fed to reevaluate the wind-down of its bond-buying program. The Fed voted last month to reduce the pace of its monthly bond purchases by another $10 billion despite December's disappointing payroll report. A continued step down of stimulus could be challenged given other signs of slowing growth and still mild inflation.

     Prior to Friday's report, forecasting firm Macroeconomic Advisers said gross domestic product would expand at a 1.9% annualized pace in the first quarter. That would be a slowdown from 3.2% growth in the fourth quarter.

     The latest data is a change from the fall, when job creation had sped up compared with the summer. That was in line with an economy that perked up, posting the strongest second-half growth since 2003.

     For all of last year, the economy added an average of 194,000 jobs per month, according to updated figures, the Labor Department said. That's stronger than the 182,000 pace previously estimated. However, the pace in the past three months slowed to 154,000.

     The change to last year's numbers in part reflects the Labor Department's annual benchmark revision, which incorporates newly available tax records. From April 2012 to March 2013, the U.S. payrolls included 369,000 more jobs than previously believed. Much of that increase was due to the reclassification of certain private household workers that were previously not counted.

     Last month, construction payrolls grew by 48,000 compared with December's decrease of 22,000. The industry is hit harder than others by frigid temperatures. The December slowdown in the category suggested last month's overall figures were held back by unseasonably cold weather.

     Temperatures remained bitter in much of the country last month, but the week of the Labor Department's survey actually had warmer than normal temperatures, JPMorgan Chase economist Daniel Silver said Thursday.

     Manufacturing payrolls expanded by 21,000 last month and leisure and hospitality jobs grew by 24,000.

     Those gains were largely offset by weakness in other categories.

     Retail employment fell by 13,000, a decline in the category that expanded rapidly most of last year. Healthcare payrolls, another growing field in 2013, barely inched up last month.

     Employment at all levels of government fell by 29,000 in January.

     Friday's report showed the labor force participation rate rose to 63.0% from 62.8% in December, though the figure remains near a 35-year low. The number of Americans unemployed for 27 weeks or longer fell by 232,000 in January. The latest data could partially reflect that more than 1 million Americans lost extended federal unemployment benefits at the end of December. To receive payments, beneficiaries had to actively look for work, and as a result were counted as part of the labor force. The drop in long-term unemployed might indicate they've now stopped looking.

     A broader measure of unemployment that includes people working part time who want full-time jobs and people who are marginally attached to the labor force stood at 12.7% in January. That is down from 13.1% in December and 14.4% a year earlier.