Jan. 10 (Bloomberg) — Payrolls increased in December at the slowest pace in almost three years, indicating a pause in the recent strength of the U.S. labor market that may partly reflect the effects of bad weather.
The 74,000 gain in payrolls, less than the most pessimistic projection in a Bloomberg survey, followed a revised 241,000 advance the prior month, Labor Department figures showed today in Washington. The unemployment rate dropped to 6.7 percent, the lowest since October 2008, as more people left the labor force.
“It’s a reminder that the improvement is not going to be a straight line,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. While “the weather probably did play a big role,” he said, “it still looks pretty soft.”
Employers may be awaiting further evidence that the economy is accelerating before they step up the pace of hiring. Treasuries rose as the report eased concern the Federal Reserve will accelerate the pace of reductions in asset purchases.
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The 10-year Treasury yield fell eight basis points to 2.88 percent at 10:20 a.m. in New York. The Standard & Poor’s 500 Index decreased 0.1 percent to 1,836.7.
The median forecast of 90 economists in the Bloomberg survey called for an increase of 197,000 jobs in December. Bloomberg survey estimates for December ranged from gains of 100,000 to 250,000.
Revisions to prior reports added a total of 38,000 jobs to overall payrolls in the previous two months. Employment increased 2.19 million last year, little changed from 2012.
The unemployment rate for December was forecast to hold at 7 percent. The jobless rate averaged 7.4 percent in 2013, the lowest in five years.
The Labor Department’s household survey showed more people were leaving the labor force. The so-called participation rate decreased to 62.8 percent, matching October as the lowest since 1978.
The decline in the jobless rate poses a communications challenge for the Fed, which has pledged to hold the main interest rate near zero “well past” the time that the unemployment rate declines below 6.5 percent.
“The Fed is really going to have to rethink maintaining a 6.5 percent threshold,” said said Robert Stein, deputy chief economist at First Trust Portfolios LP in Wheaton, Illinois.
“If their intention is to prolong the period of zero interest rates as long as feasible, then it was good that they put that ‘well past’ language in their previous statement.”
Policy makers in December decided to cut monthly bond purchases to $75 billion starting this month from $85 billion, citing improvement in the labor market.
Among those having trouble finding work is Caroline Hogge, 48, who has been looking since July 2012, when she left a procurement job at Warner Bros. in California. She moved back to her parents’ home in Tennessee and has applied for jobs as far afield as New Hampshire and Indiana.
“I go in for the interview, and then have feedback saying that ‘oh, they loved you, but you were overqualified,” said Hogge, who has a maser’s degree in history from Indiana University.