By Vicki Needham - 02/05/14 09:49 AM EST
Private-sector employers continued adding workers to their payrolls in January but at a slower pace than December.
Businesses added 175,000 jobs last month, less than the 227,000 in December, which was lower than first reported, according to an employment report released Wednesday by payroll processor ADP.
Mark Zandi, chief economist at Moody's Analytics, expects that employers added 170,000 jobs — with a loss of about 5,000 federal government jobs — in January, and that the unemployment rate dropped to 6.6 percent from 6.7 percent in December.
Zandi said that December's lower-than-expected 74,000 figure should be revised up to fall more in line with average underlying job growth.
Economists have said that the December figure was an anomaly and would be adjusted to better reflect the direction of the labor market.
The unemployment rate should drop, at least partly because of the more than 1.3 million who lost their federal emergency jobless benefits when the program expired at the end of December.
Zandi said it is important to watch the labor force participation rate, which is likely to fall further through the next six months because of that expiration of unemployment insurance among other factors.
The jobless rate is expected to fall to about 6 percent by the end of the year, without any pick-up in jobs growth, mostly due to that drop in participation, Zandi predicted.
Still, Zandi expects average monthly jobs growth to accelerate to 225,000 a month from a long-standing average of between 175,000 and 200,000.
An increase in the housing market's recovery should fuel a broad array of growth from construction and manufacturing to retail and trucking.
Construction added 25,000 jobs in January, the ADP survey said.
"Job growth should be meaningfully better despite the inauspicious start," Zandi said.
Zandi said that wintry weather has weighed on the labor market over the past couple of months, although he said January wasn't affected quite as much.
While all sizes of companies are adding to payrolls now, Zandi expressed some concern that the largest companies, those with at least 1,000 workers, were on the soft side in January and were slower than the previous six months.
He said that the slowdown could line up with the weakening in manufacturing, which lost 12,000 jobs in January.