WASHINGTON, D.C. — The U.S. economy firmly fended off global economic weakness and turmoil in China as employers added 292,000 new jobs last month, far better than expected.
The Labor Department’s December employment report confirmed an economy resilient despite the slowdown in China and other emerging economies, continued weakness in Europe and the steep job losses in the oil sector.
On top of the surprising strength in December — just 200,000 jobs were expected — the numbers for the previous two months were revised higher by a total 50,000 positions, underscoring an acceleration of hiring across the economy in the final quarter of the year.
While the official unemployment rate continued to hold at 5.0%, and wage gains remained tepid at 2.5% year on year, the report supported the Federal Reserve’s view that the employment sector was tightening fast enough to justify it raising its benchmark interest rate last month for the first time in more than nine years.
The jobs report did include decent but not incredible numbers for manufacturing, adding about 8,000 new positions, with upward revisions from no gain to about 5,000 total for October and November. There remains a technical jobs recession, though, according to analyst Alan Tonelson, who noted employment is still about 2,000 below May levels.
“While manufacturers had a more positive month than expected, adding 8,000 jobs in December, 2015 will go down one of the softest years for employment growth in the sector since the Great Recession," National Association of Manufacturers chief economist Chad Moutray said. “All in, manufacturers added 30,000 workers on net in 2015, well below the 215,000 workers hired in 2014.”
“Manufacturing's total December employment of 12.331 million hit another all-time low as a share of total non-farm employment — 8.61%," Tonelson said. "When manufacturing hit its last employment nadir, in February and March, 2010, its share of total non-farm employment was 10.69% and 10.67%, respectively.”
Tonelson also noted that manufacturing wages fell for the first time in six months, though its year on year improvement is 2.49%, just off the private sector’s 2.52%.
The Alliance for American Manufacturing released an update of its #AAMeter, which tracks the 2012 campaign promise of President Barack Obama to create 1 million new manufacturing jobs during his second term. That number is at 384,000 after this latest bump and, as noted by the AAM, the economy would need to add 51,333 new manufacturing jobs every month for the next year to hit that 1 million mark.
“While the rest of the economy added more than 2.5 million jobs in 2015, manufacturing hiring was virtually flat,” AAM president Scott Paul said. “And you can see the ripple effect of Chinese economic policy in our own factories.
“Just yesterday, 200 Ohio steelworkers received layoff notices. More than 12,000 steelworkers were laid off across the country in 2015. With China's currency devaluing, and its industrial overcapacity spreading pain around the globe, we can expect more bad news for American manufacturing in the months to come.”
Outside of manufacturing, the report was celebrated, with analysts like the Justin Wolfers of the Brookings Institute ecstatic.
It's extraordinary to see such rapid jobs growth, and increasingly low unemployment, with no inflationary pressures at all.— Justin Wolfers (@JustinWolfers) January 8, 2016
Hiring was solid across the board, led by construction, professional and business services, and health care. While the mining sector continued to shed jobs — primarily due to the collapse in crude-oil prices — even the government was picking up the slack with expanded hiring.
The data suggested an increase of workforce dropouts returning to the labor market, though there were still some signs of weakness.
The number of long-term unemployed — those unable to find new jobs after searching for 27 weeks or more — was unchanged at 2.1 million. And the number of people forced to work part time because they cannot find full-time jobs held steady at 6.0 million. The participation rate in the labor market remained at a low 62.6%, compared with more than 66% before the recession.
Fed Rate Hike Supported
Even so, the overall picture was similar to that of the members of the Fed’s policy body, the Federal Open Market Committee, when they decided on December 16 that the economy was resilient enough to handle a quarter percentage point increase in the near-zero federal funds rate, which should increase borrowing rates for consumers and businesses.
“Today’s job numbers should be soothing to the FOMC, to markets, and to workers, and stand in sharp contrast to the negative economic news emanating from China,” said Beth Ann Bovino, chief U.S. economist at Standard & Poor’s Ratings Services.
“Markets are desperate for good news, and now have it, but it comes with a caveat because better employment growth means the Fed will raise rates faster. ... People are finding jobs and getting paid more for them.”
The news gave a boost to the U.S. dollar, the strength of which has been hurting U.S. exports. Friday morning, the dollar was trading at $1.0874 per euro, compared with $1.0928 late Thursday.
By Paul Handley
Copyright Agence France-Presse, 2016