December Jobs Miss Expectations

December jobs report article updated with analyst commentary, additional information.

WASHINGTON (TheStreet) -- The economy added fewer jobs than expected in December, even as the unemployment rate dropped more than expected, raising doubts on the speed of the recovery in the labor market.

The Labor Department said in its Employment Situation Report early Friday that nonfarm payrolls rose by 103,000 in December, up from an upwardly revised 71,000 in the prior month. Economists expected payrolls to rise by 160,000 jobs, according to median consensus estimates available on Bloomberg. Estimates ranged from as low as 98,000 to as high as 225,000.

Companies accelerated hiring in December, with the private sector payrolls increasing by 113,000 after growing more modestly in November. Consensus called for a private payroll addition of 180,000.

The unemployment rate moved sharply lower to 9.4%, surprising the markets. That is the the lowest level since May 2009. Economists were expecting the rate to dip marginally to 9.7% from 9.8% in the previous month. The number of unemployed dropping by 556,000 to 14.5 million in December. There was also a withdrawal in the labor participation rate, which edged down to 64.3%.

Stocks were mostly weaker following the report, as expectations had run high ahead of the report. A strong ADP report on private sector job growth Wednesday had set up expectations for a big number. Companies added 297,000 jobs in December, according to the latest ADP National Employment Report. That was nearly three times as much as the 100,000 jobs economists were expecting.

On Thursday, the Labor Department said initial weekly claims rose to 409,000. But the overall trend has been down in the last several weeks, lifting hopes that layoffs were beginning to let up.

Still, while the absolute number for December came in lower than expected, the upward revision to November's estimates was a positive in the report, with private sector job growth revised upwards to 79,000 from 50,000 previously. The Labor Department also revised October's estimates to 210,000 from 172,000.

A weaker-than-expected November jobs report cast doubts on the recovery story last month, confounding experts who had forecast a stronger number amid evidence of an uptick in other areas of the economy.

Patrick O'Keefe, director of economic research at J.H. Cohn and a former deputy assistant secretary at the Department of Labor, said there was more to the report than initially met the eye. "The BLS report was not as significant a head fake as may have been thought," he said. He pointed out that revisions to previous estimates made it harder to make accurate predictions about additions to the payrolls from month to month. "All those who put numbers to the estimate shall be forgiven because November was underestimated."