Total nonfarm employment in America rose by 145K payrolls in December, according to the latest monthly job report from the Bureau of Labor Statistics. That was the smallest gain since May but not too surprising following the 256K jump in November. After revisions, the less-volatile 3-month average rate of job creation ended December at 184K, above the 2019 full-year average (176K) and more than enough to keep up with U.S. population growth. Manufacturing employment remained weak last month despite easing trade tensions, and hiring in other goods-producing sectors was also soft, perhaps related to weather disruptions or the deceleration in the energy sector. Fortunately hiring in the larger service sector was solid and continued to be the main driver of the longest jobs expansion in U.S. history.
Employment growth, though, has admittedly slowed over the past year, but this is consistent with the gradual decline in job creation we suggested should occur following 2018’s above-trend pace of hiring, with some payrolls volatility likely added by the trade war. The moderation should continue in 2020 but overall the labor market still appears in good shape, especially when looking at a job seeker’s ability to find work. For example, the official measure of unemployment (U-3) held at 3.5 percent in December, a half-century low, and the gauge of underemployment (U-6) fell to a new post-crisis low of 6.7 percent. There are of course areas for improvement, such as the average duration of unemployment, which at 21 weeks is still above the pre-recession highs. Headline wage growth also disappointed forecasts in December, but much of the weakness appears to have been concentrated in higher-wage industries recently. Some incessant critics of the expansion have argued that wage gains only appear stronger for lower-income Americans due to a string of minimum wage hikes, but research from the Federal Reserve Bank of Atlanta has showed that such earnings growth has also improved in states without any raises to their minimum wage. Altogether the U.S. labor market is still doing just fine. Not amazing, not terrible, and definitely not pre-recessionary.
Sources: Econoday, U.S. DoL, Indeed, FRBA, FRBSL