The economy created only 113,000 jobs in January, up from 75,000 in December. Colder than normal weather was a factor but that simply does not explain two consecutive months of poor performance. These sad results are consistent with a broadly underperforming economy.
Construction, manufacturing and hospitality registered gains, while retail trade, financial services and education and health services disappointed.
In 2013, GDP growth slipped to 1.9 percent, thanks to the $200 billion January tax increase and sequestration spending cuts, but this year should be somewhat better. President Obama is not likely to get from Congress the higher taxes he proposes and jobs creation is likely to be in the range of 200,000 per month.
Economists expect the first quarter to be slow, as global currency and equity markets adjust to the Federal Reserve phasing down purchases of longer-term Treasury and mortgage-backed securities; however, the fundamentals under the U.S. and global expansion are firming, even if those are not exciting.
Global growth will rebalance a bit from Asia to the Atlantic community as Europe begins shaking off sovereign debt problems. Conditions in Europe and the United States will broaden the foundations for global growth, and reduce vulnerabilities to dodgy banking practices and economic nationalism in places like China, Japan and Latin America.
Currently, the U.S. economy is weighed down by a colder than normal winter, and the market inefficiencies and drag on household finances imposed by the rollout of ObamaCare. However, more robust household formation and balance sheets will give the residential construction and auto sectors a boost as warmer weather arrives. 2014 will be a good year for pickup trucks so ubiquitous on construction sites, and employment in industries supporting housing and motor vehicles.
In January, unemployment fell a notch to 6.6 percent, largely because 91,000 additional working-age adults chose not to seek employment. Alarming numbers of prime working age adults remain stuck in low-wage, part-time jobs with few benefits.
Factoring in adults on the sidelines who say they would seek employment if conditions were better and part-timers desiring full-time work, the jobless rate rises to 12.7percent and that likely understates the scope of the problem. As many working-age men have become despondent, and displaced spouses in formerly two-earner families have become reconciled to permanent unemployment.