Businesses sharply curtailed hiring in December after several months of faster job growth, according to government data released Friday, marking an unexpected stumble in a recovery that seemed to be gaining momentum.
The Labor Department reported that the country added a meager 74,000 jobs in December — less than half what many analysts had expected. The unemployment rate dropped to 6.7 percent, but mostly because many people gave up looking for work, possibly deterred by a combination of cold weather, the holiday season and the expiration of long-term unemployment benefits. (To qualify for the benefit, an applicant must be trying to find a job.)
The weak numbers added fuel to the debate on Capitol Hill over whether to reinstate those federal benefits. Republicans argued that the data prove the program does little to help the unemployed find work. Democrats said the slowdown in hiring shows the labor market still needs support.
“It really tears your heart out,” Labor Secretary Thomas Perez said in an interview Friday. “People are suffering, and we need to help them.”
December’s numbers snap a four-month streak of robust hiring. Companies added more than 200,000 jobs a month, on average, from August through November amid political gridlock in Washington that led to the shutdown of the federal government.
Some economists argued that the December numbers, which will be revised several times, do not accurately reflect the underlying strength of the recovery. Other data show the economy has actually gained momentum, and many analysts have brightened their forecasts for 2014.
“It’s disappointing, not a disaster,” said Diane Swonk, chief economist at Mesirow Financial. “It doesn’t change the picture yet. We need to see more than one month.”
But the large number of people who have been out of a job for six months or more continues to cast a shadow over the labor market. There were nearly 4 million long-term jobless Americans in December, virtually unchanged from the previous month. They account for more than one-third of the country’s unemployed workers — down from the post-recession peak but still higher than at any other time in the past 60 years.
More than a dozen long-term unemployed workers met with top Labor Department officials this week to express their frustration over the slow pace of the recovery. The workers were all age 50 or older and previously had held white-collar jobs. Some had earned six figures. They had been cut off from unemployment benefits and had exhausted their savings. One man teared up during the meeting, calling his job search more harrowing than his battle with cancer.
Johnetta Thurston, 57, of Odenton, Md., was laid off from her job as a human resources director in 2011. Since then, she has received several management certifications and enrolled in graduate school — but she still has not landed a permanent job.
“So you will hear the frustration,” she said at the meeting. But, she added, “I’m not going to go down without fighting.”
Some Democrats seized on Friday’s numbers as a reason for approving their $18 million plan to extend benefits for workers who have hit the limit of their states’ standard jobless benefits. The federal government had been providing several more weeks of emergency assistance, but that program lapsed Dec. 28. A key Senate vote over whether to restart those benefits is set for Monday.
“Today’s report shows why Republicans must join with Democrats to immediately extend emergency unemployment insurance for the 1.4 million Americans whose benefits were cut off in December,” Senate Majority Leader Harry M. Reid (D-Nev.) said in a statement. “The economy is improving for some, but thousands of Americans in Nevada and across the country still cannot find work no matter how hard they try.”
The Democratic plan would extend the federal program until mid-November. It would also lower the benefits for the unemployed in the hardest-hit states from 47 to 31 weeks, on top of the usual 26 weeks that most states allow for jobless aid. Republicans are opposed to the proposal because they want to offset the cost of the unemployment benefits with other budget cuts. The program has been extended 13 times.
House Speaker John A. Boehner (R-Ohio), whose leadership team has not signaled any support for Reid’s plan, said the focus should be on creating jobs.
“Instead of making it easier to find a good-paying job, Washington has been more focused on making it less difficult to live without one,” Boehner said in a statement.
In both parties, the sense of economic and political urgency for extending benefits had been losing momentum. The run of strong economic data during the fall had given policymakers more confidence that the recovery could be sustained.
Privately, some Democratic strategists view unemployment benefits as one of the only stimulus programs available to them in a time of divided government. They believe a jolt to the broader economy is critical to helping boost President Obama’s approval ratings.
Some Democrats have talked openly about the political gains for the party if Republicans, either in the Senate or in the House, block the extension of jobless aid.
“If they do, it’s going to hurt them in the election. They’re not smelling the coffee over there on the other side of the aisle,” Sen. Charles E. Schumer (N.Y.), the No. 3 Democratic leader in the chamber, told reporters Thursday. He later added: “They block things like unemployment insurance and minimum wage at their peril.”
The high rate of long-term unemployment is one of the reasons the Federal Reserve has been cautious in withdrawing its support for the recovery. The central bank has pumped trillions of dollars into the economy and cut short-term interest rates to zero in an effort to encourage spending by consumers and businesses — and, in turn, create more jobs.
The Fed started to scale back its stimulus by reducing the amount of bonds it purchases to $75 billion this month, down $10 billion. The move signaled that the central bank had become more confident that the recovery would be sustained, but the small size of the reduction suggested the Fed believed the labor market is far from fully healed.
Friday’s data lower the probability that the Fed will make another cut when its top officials meet in Washington at the end of the month. They have emphasized that the size and pace of reductions will depend on the health of the economy. If the recovery picks up momentum, the Fed could move faster; if the economy stumbles, it could slow down.
But Paul Dales, chief economist at Capital Economics, predicted that the Fed would likely continue winding down its stimulus program in the absence of additional data showing weakness in the labor market.
“If you’re going to tweak policy on the basis of every single payrolls number that comes in, you’re going to drive yourself and the markets crazy,” he said. “You don’t just throw all that careful planning out because of one dodgy payroll.”