The early story

Employers probably expanded payrolls in December, capping the strongest year for U.S. employment since 2005, a report today may show.

The addition of 197,000 jobs followed a 203,000 advance the prior month, according to the median forecast of 90 economists in a Bloomberg survey. The projected gain would bring the annual increase to 2.27 million, which was last exceeded eight years ago. The unemployment rate may have held at a five-year low of 7 percent in December.

…“We’re seeing a substantial improvement in the labor market,” said Richard DeKaser, a Washington-based corporate economist for Wells Fargo & Co., the largest U.S. home lender. “Monthly payroll gains will be in the 200,000 territory for much of 2014. Growth is beginning to pick up.”

The Labor Department’s report is due at 8:30 a.m. in Washington. Bloomberg survey estimates ranged from payroll increases of 100,000 to 250,000.

The “unexpected” report

U.S. stock-index futures fluctuated as data showed payrolls in December increased at the slowest pace since January 2011, indicating a pause in the recent strength of the labor market.

…The 74,000 gain in payrolls, less than the most pessimistic projection in a Bloomberg survey, followed a revised 241,000 advance the prior month, Labor Department figures showed today in Washington. The median forecast of 90 economists called for an increase of 197,000. The unemployment rate dropped to 6.7 percent, the lowest since October 2008, as more people left the labor force.

As more people left the work force

Curious why despite the huge miss in payrolls the unemployment rate tumbled from 7.0% to 6.7%? The reason is because in December the civilian labor force did what it usually does in the New Normal: it dropped from 155.3 million to 154.9 million, which means the labor participation rate just dropped to a fresh 35 year low, hitting levels not seen since 1978, at 62.8% down from 63.0%.

Funny what happens when you remove the dis-incentive to be unemployed.

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