The U.S. labor market turned in a solid performance at the end of 2016, sending job gains above 2 million for a sixth year as paychecks rose by the most during the current expansion.
The 156,000 increase in December payrolls followed a 204,000 rise in November that was bigger than previously estimated, a Labor Department report showed Friday in Washington. The median forecast in a Bloomberg survey of economists called for a 175,000 advance. The jobless rate ticked up to 4.7 percent as the labor force grew, and wages rose 2.9 percent from December 2015.
Worker shortages may become more frequent in the coming year, which means employers could have to give out bigger wage hikes even as hiring cools. The data underscore a job market that will continue to buoy consumer spending in 2017, with Federal Reserve officials deeming the situation at or close to full employment.
“It puts 2016 as a pretty solid year for employment,” Tom Simons, an economist at Jefferies LLC in New York, said before the report. “The overall dynamics in the labor market are still improving. We’re going to continue to see upward momentum in wages this year.”
The December results were helped by more hiring in health care and social assistance, whose gain of 63,300 workers was the most since October 2015. Factories added employees, along with leisure and hospitality businesses.
Revisions to prior reports added a total of 19,000 jobs to payrolls in the previous two months.
The latest payrolls tally brought the advance for 2016 to
2.16 million, after a gain of about 2.7 million in 2015. The streak of gains above 2 million is the longest since 1999, when Bill Clinton was president.
December payroll estimates of economists surveyed by Bloomberg ranged from gains of 125,000 to 221,000. November was initially reported as a 178,000 increase.
The unemployment rate, which is derived from a separate Labor Department survey of households, rose 0.1 percentage point as employment increased by 63,000. The jobless rate matched the median estimate in a Bloomberg survey.
Also on Friday, the Labor Department released revisions dating back to 2012 for data from the household survey, including the unemployment rate. October’s rate was revised to
4.8 percent from 4.9 percent and September’s was lowered to 4.9 percent from 5 percent.
Payroll figures from the survey of employers will be revised when the January data are released next month.
Among the details of the December report, the participation rate, which shows the share of working-age people in the labor force, increased to 62.7 percent, from 62.6 percent. It has been hovering close to the lowest level in more than three decades.
Private employment, which excludes government agencies, rose by 144,000 after a 198,000 increase the prior month. Government employment rose by 12,000.
Factory payrolls gained by 17,000, after a 7,000 decline in the previous month. Service Providers
Compared with manufacturers, service providers including restaurants, business services and health-care are typically less exposed to headwinds such as the stronger dollar and the health of overseas economies.
Retailers increased payrolls by 6,300. Employment in leisure and hospitality rose by 24,000.
Wages are showing their fastest gains since the last recession ended. Average hourly earnings gained by 2.9 percent over the 12 months ended in December, the most since June 2009, following a 2.5 percent gain the prior month. Compared with November, worker pay increased 0.4 percent.
The acceleration in worker pay may have, in part, reflected the unwinding of a calendar quirk that subdued the November tally. Since the 15th of the month fell within the employment survey week, increases in bi-monthly pay are more likely to have been captured.
The average work week for all workers was unchanged at 34.3 hours.
Some measures of labor market slack showed improvement. Americans who are working part time though would rather have a full time position, or the measure known as part-time for economic reasons, fell to 5.6 million.
The underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want to work but have given up looking -- dropped to 9.2 percent from 9.3 percent.
At the Fed’s December meeting, officials noted that the job market had improved appreciably over the past year and slack had declined. Most participants viewed the cumulative progress as “having brought labor market conditions to or close to those consistent with the Committee’s maximum-employment objective,” according to minutes of the session, released Wednesday.
|Construction workers look over papers in a new subway station in New York on Dec. 22. PHOTO: SETH WENIG/ASSOCIATED PRESS|
Economists React to the December Jobs Report: ‘Very Close to Full Employment’
Job creation slowed in December but other details pointed to a tightening labor market. The economy added 156,000 jobs last month, while the jobless rate rose slightly to 4.7% as more Americans entered the labor force. Workers’ hourly wages grew 2.9% over the past 12 months, the strongest yearly gain in more than seven years. Here’s how economists and analysts reacted to Friday’s report.
“For the year, the economy averaged job creation of about 180,000 per month—a solid result, but one that represents the slowest pace since 2012. While this is partially reflective of the slowdown in the pace of economic growth, it also reflects a labor market that is increasingly tight. Employers are simply having a harder time filling open positions as the economy nears full employment.“—Jim Baird, Plante Moran Financial Advisors
“This solid report further underlines the Fed’s point in December that the economy is now very close to full employment. Job growth was decent and wage growth is picking up nicely. But the only real show in town is Donald Trump’s inauguration. The economy is doing well and doesn’t obviously need the shot in the arm that Trump is planning on providing. The interaction between the Fed and Trump, and the resulting policy mix, is likely to be the defining theme for investors this year.”—Luke Bartholomew, Aberdeen Asset Management
“The rebound in hourly earnings reflects the unwinding of the calendar quirk which depressed the November data, and lifts the [year-over-year] rate to 2.9%, the highest since June 2009. With productivity growth trending at less than 1%, the Fed cannot allow wage inflation to rise much above 3% if it is to forecast 2% inflation with a straight face….In short, this report tells the Fed not to delay further tightening. We think rates will rise again as soon as March, provided we have some clarification on the likely extent of fiscal easing by then.”—Ian Shepherdson, Pantheon Macroeconomics
“Looking at the breakdown, the 17,000 increase in manufacturing employment echoes the improvement in the survey evidence on the factory sector. Almost half of the total gain in employment came from just one sector—education and health care. The 15,500 decline in temporary employment last month is a concern, but it followed a 23,800 spike the month before.”—Paul Ashworth, Capital Economics
“We believe the slowing in payrolls was largely due to weather effects, with the trend still quite strong—more than strong enough to keep the unemployment trending down. That interpretation is consistent with the pattern in jobless claims, which rose sharply during the sample week but then fell sharply after that. Although the unemployment rate rose a tenth in December, it had declined 0.3 points in the previous two months. Meanwhile, wage gains are accelerating, even if today’s 0.4% [month-over-month] reading was exaggerated by calendar quirks (opposite the pattern in November). We expect unemployment will keep falling and wage gains will continue to accelerate in the year ahead, putting pressure on the Fed to keep tightening.”—Jim O’Sullivan, High Frequency Economics
“The take-home weekly pay rose by only 1.9% because the total hours worked declined. Even in real estate, where there is a need for increased home construction and more commercial spaces, the weekly hours worked fell to 38.7 hours. The typical hours worked had been 39 for most of 2016 and was 39.6 exactly one year ago. This declining hours imply weak future hiring since existing workers will first be allowed to get in extra hours before adding new hires.“—Lawrence Yun, National Association of Realtors
Healthcare, manufacturing among winners in December jobs report
The US economy added 156,000 jobs in December, with the biggest gains in the healthcare industry, which expanded by 43,000 jobs, according to US Bureau of Labor Statistics employment data released Friday.
Notably, manufacturing workers finally saw relief in December when that industry added 17,000 jobs. This was after months of declines amid a shrinking energy sector slammed by low oil prices, and amid a strong dollar that hurts US companies that export goods and services to countries with weakening currencies, such as Japan, China, and members of the European Union.
Another modest highlight for workers in December was a .4 percent bump in average hourly earnings from November. This reflected an increase of 10 cents to $26 an hour, according to the labor department report, and helped push average 2016 earnings up 2.9 percent, the biggest hike since June 2009.
Other labor market indicators in December reflected upward trends that have been percolating throughout the year, all reflecting a solid economy to that will be handed over to Donald Trump by President Obama’s administration. Mr. Obama took over the White House during the biggest recession since the Great Depression of the 1930s.
The unemployment rate last month also remained low, reaching near pre-recession levels, and way below a 10 percent peak during the height of the recession. Though December’s rate rose to 4.7 percent from 4.6 percent in November, the rise is a symptom of a positive trend, according to business analytics firm IHS Markit. The labor force grew by 184,000 last month, adding more people to the job statistics pool which can cause the unemployment rate to rise.
“At this pace of growth, we can expect to continue to see improvements in the labor market over the next couple of years as we approach full employment,” wrote Elise Gould, senior economist at the Economic Policy Institute, a think tank, in a newsletter Friday.
Though economists expect the economy to grow modestly through next year, with wages expected to rise by 3 to 3.5 percent, some worry that many Americans who lost jobs during the Great Recession have not come back to work. The labor force participation rate, which tracks people over 16 years old who are working or looking for jobs, in December was 62.7 percent, down from 66.4 in December 2006, according to the labor department.
Some of this decline can be attributed to retiring baby boomers, as Business Insider points out. But not all of it. Workforce participation among working-age Americans has been declining for decades, and has been especially low after the recession. In part this has to do with a shift in the labor market that makes it much harder to earn a living wage without post-secondary education. Some economists worry that among those who are not returning to the workforce are Americans who don’t have the skills and training for the jobs that employers say they are struggling to fill, from machinists to health technicians.
This could help explain why the economy added fewer jobs in 2016 than in 2015, says IHS chief economist Nariman Behravesh: 2.2 million versus 2.7 million.
“We can hope that there are still some discouraged workers who might come back, though that pool is diminishing,” Dr. Behravesh says.
But with the labor market having absorbed most available workers, businesses will become more eager to fill open slots, which should continue raise wages. Economists expect the unemployment rate to stay low, around 4.5 percent, in 2017.