United States: Payrolls disappoint in December; wage growth edges up
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.