This morning’s payroll jobs report was a major disappointment. The gain of 74,000 nonfarm payroll jobs (87,000 private sector payroll jobs) in December was less than half the consensus estimate that was looking for a gain of 200,000 nonfarm payroll jobs. ADP/Moody’s had estimated earlier this week that the private sector added 239,000 jobs in December. It is worth noting that this difference actually represents a convergence of ADP/Moody’s and BLS estimates of private sector payrolls. Prior to today’s report BLS was estimating private sector payrolls to be more than 400,000 higher than ADP/Moody’s.

The report marked the 46th consecutive month of private sector payroll gains. Since February 2010, when private sector payroll employment hit its lowest point of the cycle, private sector payrolls have grown by 8.2 million jobs or 7.7%. This is significantly lower than the 11,9% growth private sector jobs during the average of other post-1960 recoveries over a comparable period. This equates to a private sector jobs gap of more than 4.5 million compared to the average of other recoveries. When compared to the strong Reagan recovery of the 1980s, the gap grows to 7.0 million jobs.

The average private sector payroll jobs gain posted during the current recovery is 178,000. This is compares with an equivalent average equivalent monthly gain of 276,000 in other post-1960 recoveries and 330,000 for the Reagan recovery.

To put this in perspective, there has not been a single month during the current recovery in which the private sector has posted a payroll jobs gain greater than the equivalent average gain during the Reagan recovery. In fact out of the 46 months of private sector jobs gains, there have only been three months where the gain exceeded the equivalent average gain of other post-1960 recoveries

BLS also reported that the unemployment rate declined to 6.7% in December. The decline was primarily attributable to another decline in the labor force participation rate to a 36 year low of 62.8%. If the labor force participation rate had not declined since January 2009, the unemployment rate would stand at 10.8% -- significantly higher than the reported rate of 6.7% and the stimulus promised rate of 5.0%.

 

This point is also illustrated by the employment-to-population ratio which has actually declined since the recession ended and stands two percentage points below its January 2009 level.

To summarize, today’s jobs report represented a significant “negative surprise” and helps underscore the weak nature of the labor market’s recovery. Nearly five years later, private sector payroll employment remains 640,000 jobs below its January 2008 peak.