United States: Payrolls disappoint in December; wage growth edges up
January 5, 2018
Results from the December jobs report indicate that hiring dynamics cooled off in the month, with employment gains coming in under market expectations. Non-farm payrolls rose 148,000 in December, well under the 191,000 expected by analysts and below November’s print of 252,000 new jobs, a figure that was revised up 24,000 jobs from last month’s report.
Looking at sectoral data, December’s print was largely driven by a deceleration in hiring growth among service industries, with gains of only 91,000 jobs following 176,000 in November. The retail sector fared especially poorly, cutting 20,000 jobs as brick-and-mortar stores faced increasing competition from online retailers. On the other hand, goods-producing industries kept up the strong pace observed in previous months, with construction payrolls up 30,000 and the manufacturing sector adding 25,000 new jobs.
The unemployment rate was stable at a 17-year low of 4.1% in December, in line with market expectations. The duration of the average workweek was also unchanged from November at 34.5 hours, as was the labor participation rate at 62.7%. Average hourly earnings edged up 0.3% from the previous month, up from the downwardly revised 0.1% increase recorded in November (previously reported: +0.2% month-on-month). On an annual basis, wage growth came in at 2.5%, up from November’s 2.4% increase. The figure, among the most scrutinized in the report, still shows subdued wage dynamics despite an economy at full employment.
The speed at which wage pressure builds will be a key measure for the Federal Reserve to decide on the pace of its interest rate normalization in 2018. Given the now nearly-depleted pool of available workers, the Bank is worried that scarcity of skilled labor is preventing further business growth.
U.S. Unemployment Forecast
FocusEconomics Consensus Forecast panelists expect the unemployment rate to average in 4.1% in 2018, which is unchanged from last month’s forecast. For 2019, the panel expects the unemployment rate to drop to 3.9%.
Author: Joffrey Simonet, Economist