Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

This jobs report should keep Fed Chair Janet Yellen up at night

Yellen headed for the hot seat?

New Federal Reserve Chair Janet Yellen sounded this week like she isn't very worried about the state of the U.S. jobs picture.

Maybe she should be.

As the central bank chief spoke to the House Financial Services Committee on Tuesday, the Bureau of Labor Statistics released its under-the-radar Job Openings and Labor Turnover Survey, or JOLTS report. Within the details were some clues that the recent jobs weakness is real.

Job seekers sit at computers looking for jobs available at a Workforce One Employment Solutions center in North Miami, Fla.
Getty Images

Yellen more or less dismissed the December and January reports as not indicative of underlying strength in the economy. The reports showed job creation of 75,000 and 113,000, respectively—well below economist expectations and flying in the face of belief that the economy is poised to show a significant rebound in 2014.

Fed still expanding balance sheet: Pro

(Read more: Bad jobs reports won't change tapering: Yellen)

In fact, the JOLTS data showed even weaker job creation than the BLS report—just 67,000 new positions in December.

"There certainly is a lot of noise out there regarding jobs data, but ... this latest release confirms the negative sentiment induced by the (BLS) establishment survey" released Friday, Nick Colas, chief market strategist at ConvergEx, said in a report analyzing the JOLTS data. "It is the first uniformly negative report seen in over a year."

(Read more: Wicked winter puts big chill on job creation)

Some highlights—or lowlights, as it were of the ConvergEx breakdown:

  • December was the worst month for job creation since August 2012, registering less than half the previous six-month run of growth between 150,000 and 200,000 jobs.
  • Layoffs hit a four-month high of 109,000, about the same as the same period in 2012 but breaking a three-month streak of improvements.
  • Employers hired fewer workers than any month since June.

On the positive side, job openings dropped off but were 10.5 percent higher than December 2012.

"Anecdotal evidence in business sentiment surveys and the Beige Book, however, continues to show that companies are reluctant to go on hiring sprees given the elevated level of economic uncertainty," Colas said. "This number looks positive from a longer-term standpoint, but the recent trend could be sign that more trouble is on the way."

(Read more: The economics of quitting your job)

One final note: What Colas calls the "Take This Job and Shove It" indicator also showed trouble, as the number of people who left their jobs voluntarily—a sign of confidence that better opportunities are elsewhere—dropped 1.7 percent.

For Yellen, then, the strongest test could lie ahead for a jobs market that shows, at least for the moment, that it may not be as strong as the Fed thought when it voted to reduce the pace of its monthly money-printing stimulus program.

"With a note of caution that the JOLTS reports are infamously choppy month-to-month, December's edition is quite a bit troublesome, especially with the backdrop of last Friday's jobs report," Colas said.

"External factors such as Fed tapering, emerging markets volatility ... and uncertainty surrounding the nation's budget problems will undoubtedly play a large role in determining exactly when this country returns to full employment. By all measures, this month's JOLTS release doesn't give us much to hope for, except that the notoriously choppy data set will bounce back next month."

—By CNBC's Jeff Cox. Follow him on Twitter @JeffCoxCNBCcom.

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