Slow Jobs Growth Stirs Worry

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from The Wall Street Journal,

Economy’s Anticipated 2014 Breakout Hits a Speed Bump, but Stocks Shrug Off Disappointing Report.

A hiring chill hit the U.S. labor market for the second straight month in January, reflecting employers’ reluctance to take on new workers despite some of the nation’s strongest economic growth in years.

U.S. payrolls rose a seasonally adjusted 113,000 in January after December’s lackluster gain of 75,000 jobs, marking the weakest two-month stretch of job creation in three years, the Labor Department said Friday.

Yet the unemployment rate ticked down to 6.6%—the lowest level since late 2008. The decline came because more people found jobs last month as opposed to last year when it fell in part because of unemployed Americans abandoning their job hunts and dropping out of the labor force.

The soft hiring numbers join a recent cavalcade of mixed economic data on exports, housing and manufacturing. These trends, coupled with worries about emerging markets, have unsettled investors and stoked doubts about a stronger global recovery.

“The economy got a little ahead of itself late last year,” said Doug Handler, chief U.S. economist at IHS Global Insight. He said economic fundamentals generally remain strong, “but there are headwinds in the first quarter.”

The report left several puzzles unanswered, including the dichotomy of solid growth and weak hiring. Throughout the recovery, businesses have been able to boost production at a faster pace than employment. That trend could also be supporting GDP growth despite the hiring slowdown.

Despite some mounting investor speculation Friday that helped stoke the stock market, the jobs report likely won’t derail the Federal Reserve’s pullback from the bond-buying program it has used to stimulate the economy. But more weak employment reports and persistently low inflation could intensify debate about the central bank’s strategy on one of its key easy-money policies at its March meeting.

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