Wages Fall Although Economy Adds 292k Jobs in December

Jan 09, 2016, 23:29

A certain amount of unemployment is healthy for an economy, because workers should feel confident leaving a job or entering the job market to look for work. This is actually probably a good number in terms of the market because it showed we're still cranking despite China, but we're not so hot that the Fed has to come here in March. In another positive sign, job gains for October and November were revised up by a total 50,000. Despite the drop in average hourly earnings in December, the year-on-year gain in earnings was 2.5 percent in December compared to 2.3 percent in November. "You have to believe there is more slack in the labor market than the standard unemployment rate would suggest". A similar scenario appeared to play out in August and September, when payroll growth slumped before rebounding strongly the next two months.

2015 was one of the best years in wage growth.

For all of 2015, the economy added an average of 221,000 jobs a month.

The data helped staunch the bleeding on Wall Street, with U.S. stocks rising at the open after the worst four-day start to a year ever.

The private service sector created the lion's share with 230,000 new jobs, with education and health services adding 52,600 jobs and temporary-help services contributing 34,400 jobs. Most economists expect US consumer spending will offset any overseas drag, though many forecast only modest overall growth.

As it has been for multiple years now, the strong report was a welcome respite for the U.S. economy after uncertainty in other areas. These are some confusing tea leaves for the Federal Reserve, as the uptick in employment over the past three months normally suggests that the rate hikes some have been signaling are appropriate.

In the wake of soft reports on manufacturing, construction spending and export growth, economists this week slashed their fourth-quarter growth estimates by as much a full percentage point to as low as a 0.4 percent annual rate. The NFIB's December Jobs Report showed an increasing number of employers planning to reduce payroll, he said. Average hourly earnings for 2015 increased 2.5 percent, according to the Bureau of Labor Statistics - the best in years, but not pre-recessionary levels.

"As the labor markets get tighter, the downward trend in the unemployment rate is naturally becoming more moderate", said Levanon. There were also gains in the leisure and hospitality sector.

Many economists expect the Fed to raise its benchmark rate three times this year.

But while business investment has suffered, American consumers have been buoyed by rising home prices, strong job growth, cheap gasoline and reduce household debt.

In a note to clients, Citi previewed today's jobs report by calling it the "least important payrolls report in a while".

December finished high in the job count, pushing what was already a great year for the United States economy to a great year, despite many other countries have a troublesome year.

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