Economists are reassessing their outlook for the US after last week's shock employment report that suggested the US labor market is far weaker than earlier believed.
The report showed a paltry 1,000 jobs created in December, far below the 150,000 projected by forecasters. To compound the impact, the government also revised downward the number of jobs created in prior months.
Although the official jobless rate fell to 5.7 percent from 5.9 percent, that was largely the result of discouraged workers leaving the labor force, analysts said.
"December's disappointing employment canvass has reignited the debate over whether this recovery is sustainable or not," said Morgan Stanley analysts Richard Berner and David Greenlaw in a research note.
"In our view, weak job growth remains the economy's potential Achilles heel, because jobless recoveries are simply not sustainable."
The weak payrolls data flew in the face of other economic data, which show robust economic activity in the wake of a powerful growth spurt at an 8.2 percent pace in the third quarter.
Analysts say that although the economic output figures are boosted by tax cuts, low interest rates and other temporary factors, this could quickly fade if job growth stalls and consumers retrench.
Although job losses appear to have been stemmed, job creation is far short of what is needed to sustain economic growth.
"The jobless recovery continues. Neither businesses nor potential employees have a lot of confidence in the economy," said Sung Won Sohn at Wells Fargo Bank.
"The shrinking labor force is not a good sign. Many of these discouraged workers lost high paying manufacturing jobs, which have been outsourced overseas or replaced by technology."
Some say Friday's labor report simply doesn't add up, with data from two separate surveys offering two different pictures.
"There is a huge difference in the picture being painted by the household [unemployment] and establishment [payrolls] reports," said Joel Naroff at Naroff Economic Advisors.
"The household survey says that 2 million people have found jobs over the past year. The establishment survey says that firms cut out 74,000 positions. These divergences have existed in the past, but the persistence and size creates uncertainty about the true picture of the labor markets ... this report really doesn't seem to make much sense."
Still, the report underlined the potential stumbling block for the US economy when the massive stimulus from tax cuts and low interest rates fades.
"The modern-day US economy has never been through anything like this," said Morgan Stanley economist Stephen Roach.
"Fully 25 months into this so-called economic recovery, private-sector jobs are still about 1 percent below levels prevailing at the official trough of the last recession in November 2001."
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