U.S. Added Fewer Jobs Than Expected in December
Bloomberg's Julie Hyman breaks down the December U.S. jobs report.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, a Labor Department report showed Friday. The jobless rate was at 4.1 percent for a third month, while average hourly earnings increased by 2.5 percent from a year earlier, after a 2.4 percent 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.”
A separate report on Friday was also disappointing, as the Institute for Supply Management’s index of U.S. service industries fell to a four-month low amid a slowdown in orders.
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.
The decline in retail reflected job losses at department and general-merchandise stores. While such vendors have been suffering in recent years at the hands of online sellers led by Amazon.com Inc., the category of warehousing and storage -- partly associated with Internet shopping -- also lost 4,800 jobs in December. Other data indicate retail spending was solid during the holiday season and the U.S. consumer is in good shape.
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.
What Our Economists SayTo be sure, the headline outcome was disappointing. However, there is an important silver lining of this report -- goods sector employment, which continues to show not only solid, but building momentum. The December gain was 55,000 vs. a 42,000 3-month trailing average. This is an important indication that underlying economic activity is accelerating, and this will ultimately drive private service-sector hiring to a faster pace, as well. In fact, much of the weakness in the payroll gain was due to private services, and more specifically retail, trade and transportation -- all categories which performed solidly in November.-- Carl Riccadonna and Yelena Shulyatyeva, Bloomberg Economics For more, see the full report here and an audio reaction here. |
Average hourly earnings rose 0.3 percent from the prior month following a downwardly revised 0.1 percent gain, the report showed.
Among other details of the report, the participation rate was unchanged at 62.7 percent in December. The rate, which is hovering near the lowest level since the 1970s, has nevertheless 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 Baby Boomer workers who are retiring.
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 proven 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 percent of the economy.
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— With assistance by Chris Middleton, Sophie Caronello, and Steve Matthews
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