U.S. payroll gains slowed by more than forecast in December, wages picked up slightly and the jobless rate held at the lowest level since 2000, adding to signs of a full-employment economy.
Employers added 148,000 workers, compared with the 190,000 median estimate of economists surveyed by Bloomberg, held back by a drop in retail positions, according to a Labor Department report released Friday. The jobless rate was at 4.1% for a third month, while average hourly earnings increased by 2.5% from a year earlier, after a 2.4% gain in November that was revised downward.
The dollar and Treasury yields initially fell after the report and, along with U.S. stock futures, have since recovered. The job gains, while below forecast, bring the 2017 total to 2.06 million jobs — below 2016 but slightly more than analysts had been expecting at the start of Donald Trump’s first year as president. With the economy at or near maximum employment, one of the Federal Reserve’s goals, the figures likely keep the central bank on track for continued gradual interest-rate hikes in 2018.
While payroll increases have slowed over the past few years as the labor market tightens, economists say job gains above 100,000 a month are still enough to keep putting downward pressure on the jobless rate.
“It’s a little soft across the board but overall, when you’re this close to full employment, I think it’s reasonable to see some slowdown in job gains,” said Jeremy Schwartz, a U.S. economist at Credit Suisse in New York. “This year we should probably expect to see some slowdowns in job gains — it’s just harder to add jobs when there’s a smaller pool to choose from.”
“This is a benign slowdown,” Schwartz said. “The Fed would probably be happy to see this slowdown.”
The breakdown of December data across industries showed solid gains of 30,000 in construction and 25,000 in manufacturing. Retailers cut 20,300 positions during the height of the holiday-shopping season, bringing total gains among service providers to 91,000, down from 176,000 in November.
Several economists, including Michael Hicks of Ball State University and Alliance for American Manufacturing president Scott Paul pointed to the strong manufacturing numbers as another bright point in the report.
“It's worth noting that factory jobs are growing at a faster rate than jobs in the overall economy,” Paul said. “Automation and robotics clearly have less of a dampening effect on manufacturing jobs than many have predicted.
“The key question is how to keep this factory job momentum in 2018. It starts with the administration acting decisively on long-deferred promises to crack down on unfairly traded imports from China and other countries, and continues with a much-needed boost in infrastructure spending.”
Revisions to prior reports subtracted a total of 9,000 jobs from payrolls in the previous two months, according to the report. November’s reading was revised upward to 252,000 from 228,000.
Wages Rise
Average hourly earnings rose 0.3% from the prior month following a downwardly revised 0.1% gain, the report showed.
Among other details of the report, the participation rate was unchanged at 62.7% in December. The rate, which is hovering near the lowest level since the 1970s, has nonetheless held steady in the past year. Fed Chair Janet Yellen has said that’s a positive sign, because the rate is under downward pressure due to retiring Baby Boomer workers.
Steady household demand and a pickup in capital investment, backed by elevated consumer and business sentiment and improving global demand for U.S. goods, bode well for employment in 2018.
Time will tell whether the economic strength — along with the $1.5 trillion tax overhaul signed in December — translates into bigger wage gains, which have proved elusive during the expansion. The Trump administration argues that tax cuts for corporations will help increase productivity and boost pay for rank-and-file employees. That would in turn aid consumer spending, which accounts for about 70% of the economy.
Other Details
The U-6, or underemployment, rate rose to 8.1% from 8%. That measure includes part-time workers who’d prefer a full-time position and people who want a job but aren’t actively looking. … People working part-time for economic reasons, meanwhile, rose by 64,000 to 4.92 million. … Private payrolls rose by 146,000, below the median estimate of 193,000, after increasing 239,000. Government payrolls advanced by 2,000. … The average workweek for all workers unchanged at 34.5 hours, matching the median estimate. … The number of people out of work for 27 weeks or longer, or the so-called long-term unemployed, fell as a share of all jobless to 22.9% from 23.9%. … In annual revisions to data based on the household survey, the unemployment rate for June 2017 was lowered to 4.3% from 4.4%. Rates for other months during the year were unrevised.
By Katia Dmitrieva
