December’s U.S. employment report came in much weaker than expected today, suggesting that the U.S. economy isn’t out of danger just yet.

Although the U.S. unemployment rate held steady at 6%, U.S. companies slashed 101,000 jobs during the month. Economists were expecting a gain of the 30,000 jobs.

The results for November were also revised sharply down, adding to the impression of weakness. “Most industries are still in cost-cutting mode: 57% of industries reduced payrolls in the last three months. The unemployment rate held steady at 6% as a drop in teenage joblessness kept the total from rising,” commented BMO Nesbitt Burns.

RBC Financial Group economists suggested that a reduction in retail trade payrolls, due in part to some seasonal adjustment variations, contributed to the bulk of the decline in jobs. “As such, this report should be viewed with some caution and could be subject to some revision next month. Excluding retail trade, employment rose by 3,000 compared to a decline of 48,000 in November.”

“While the final U.S. employment numbers for 2002 are clearly a disappointment, they should not be seen as too surprising,” said RBC. “As a somewhat lagging indicator of economic conditions, an improvement in the labour market will likely be one of the last signs to suggest that a full-scale economic recovery is underway.”

CIBC World Markets called the news, “bad, but not all bad,” citing a rise in manufacturing hours. Still, it notes that the weak numbers may spell softening consumer spending. “The Fed isn’t likely to panic over a bad month or two on the jobs front, given that Q4 was already written off in terms of GDP growth. But the drag on consumer confidence will set the stage for the Fed to resume its easing course by the March FOMC,” it says.

http://www.bls.gov/news.release/empsit.nr0.htm