business

Upbeat employment report underscores U.S. economic strength

5 Comments
By Lucia Mutikani

U.S. employers hired the most workers in 10 months in December while boosting wages, pointing to sustained strength in the economy that could ease fears of a sharp slowdown in growth.

The upbeat employment report from the Labor Department on Friday stood in stark contrast with reports this week showing Chinese factory activity contracting for the first time in 19 months in December and weak manufacturing across much of Europe.

Concerns about the U.S. economy heightened following surveys showing sharp declines in consumer confidence and manufacturing activity last month, which roiled financial markets. Both were seen as more red flags that the economic expansion, now in its ninth year and the second longest on record, is losing steam.

"The jump in payrolls in December would seem to make a mockery of market fears of an impending recession," said Paul Ashworth, chief economist at Capital Economics in Toronto."This employment report suggests the U.S. economy still has considerable forward momentum."

Nonfarm payrolls surged by 312,000 jobs last month, the largest gain since February, as employment at construction and leisure and hospitality locations snapped back after being restrained by unseasonably cold temperatures in November.

Job gains were reported across all industries, with the exception of the information sector, which shed employment for the second straight month. Data for October and November were revised to show 58,000 more jobs added than previously reported.

The economy created 2.6 million jobs last year compared to 2.2 million in 2017.

Average hourly earnings rose 11 cents, or 0.4 percent, in December after gaining 0.2 percent in November. That lifted the annual increase in wages to 3.2 percent, matching October's rise, which was the largest in 9-1/2 years.

Wages advanced 3.1 percent on a year-on-year basis in November. Employers increased hours for workers, pushing the average workweek up to 34.5 hours from 34.4 hours in November.

The unemployment rate increased to 3.9 percent from near a 49-year low of 3.7 percent in November as a strong labor market pulled some 419,00 jobless Americans from the sidelines. Fewer workers worked part-time for economic reasons in December.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose two-tenths of a percentage point to 63.1 percent, the highest level since September 2017.

The strong employment report likely keeps the Federal Reserve on course to continue raising interest rates this year, deepening its rift with Wall Street and President Donald Trump, who has chastised the Fed and its chairman, Jerome Powell, repeatedly for the rate increases.

Speaking at an American Economic Association event with former Fed chiefs Janet Yellen and Ben Bernanke on Friday, Powell sought to placate jittery financial markets. Powell said the U.S. central bank was "always prepared to shift the stance of policy and to shift it significantly" if necessary. He also said he would not resign if Trump asked him to so.

The Fed raised rates four times in 2018. The central bank last month forecast two rate hikes this year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

U.S. financial markets are projecting no rate hikes in 2019. In the latest signal that investors see little room for the Fed to lift rates any further, yields on 2-year U.S. Treasury notes on Thursday dropped below the Fed's policy rate for the first time in more than a decade.

U.S. stocks rallied on the employment report on Friday and extended gains after Powell's comments. The dollar surrendered earlier gains against a basket of currencies and U.S. Treasury yields rose.

BROAD EMPLOYMENT GAINS

"This should, at least for today, mute expectations that the Fed is off the table completely this year," said Omair Sharif, a senior economist at Societe Generale in New York.

The December jobs gain pushed total U.S. employment above 150 million jobs for the first time. The Labor Department has not been affected by the partial shutdown of the U.S. government and will continue to publish economic data complied by its statistics agency, the Bureau of Labor Statistics.

Data releases from Census Bureau and Bureau of Economic Analysis have been suspended during the shutdown, which started on Dec. 22 amid demands by Trump for $5 billion in funding for a wall on the U.S.-Mexico border.

The robust labor market, especially strengthening wage growth, suggests the economy will continue to expand this year despite the ebb in consumer confidence, continued weakness in the housing market and cooling manufacturing activity.

"Strong job gains coupled with rising wages should act as a tailwind for consumption," said Michelle Meyer, chief economist at Bank of America Merrill Lynch in New York.

Growth forecasts for the fourth quarter are around a 2.6 percent annualized rate, with risks tilted to the downside amid the fading stimulus from the Trump administration's $1.5 trillion tax cut package, a trade war with China and policy uncertainty in Washington.

The economy grew at a 3.4 percent pace in the third quarter. It needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population. Job growth averaged 220,000 per month in 2018. It is expected to slow to around 150,000 per month this year as workers become more scarce.

Anecdotal evidence has been growing of companies experiencing difficulties finding workers, and raising wages to retain and attract employees. The government shutdown, if it extends beyond next week, could weigh on January payrolls.

Employment at construction sites rebounded last month, with companies hiring 38,000 employees after adding no workers in November. Manufacturing payrolls rose by 32,000 jobs in December. Retailers hired 23,800 more workers.

Professional and business services employment increased by 43,000 jobs last month and government payrolls rose 11,000. Employment in the leisure and hospitality sector increased by 55,000 jobs. The health and education sector added 82,000 positions.

© (c) Copyright Thomson Reuters 2019.

©2019 GPlusMedia Inc.

5 Comments
Login to comment

These articles in the business section filled with facts sure look much different once they make their way to the politics section.

keep up the good work President Trump, we all appreciate it.

2 ( +2 / -0 )

A county's economic worth are in one basic concept of sufficiency and balance in ... "resources" and "production". There are the natural and (unnatural) man-made resources as well as the "human" resource (the work force). All three must be properly coordinated to be productive. In survival mode as well as in luxury mode, all resources must be producing efficiently, effectively and sufficiently, and most importantly, well balanced.., but not excessively where there is waste.

When there is misuse, excess, or idleness in any of the three for whatever reason, the balance is lost and the economic worth and value is negatively affected.

The workforce, human resource, has been lying idle.. for sometime due to 1) "dependency", 2) "incompetence", 3) "external influence", etc. but most importantly lack of "opportunity" for those that were able.

Trump has found a way to give them the opportunity.

That is because "opportunity" was either stolen or given away to other countries by those who for whatever reason brought "imbalance" to the country.

Those... sadly were our own people in government and corporations that saw "exploitation" of other economies along with ours as "opportunity" for themselves.

1 ( +1 / -0 )

Good news for the U.S.

That's a big employment number. They do tend to fluctuate quite a bit.

In terms of interest rates. They can't stay at 0% forever. At 2.5%, they could and should go further when or if the economy can tolerate it.

Heaven knows how the E.U is going to raise rates given their predicament. Same applies to Japan given its flat growth.

Out of the U.S, E.U and China, its pretty clear that the U.S is doing the best in terms of trends in economic activity at this point.

1 ( +1 / -0 )

New year would bring in new higher minimum wage in some states

0 ( +0 / -0 )

Uh oh. The #resistance is not going to be happy about this positive economic news.

0 ( +0 / -0 )

Login to leave a comment

Facebook users

Use your Facebook account to login or register with JapanToday. By doing so, you will also receive an email inviting you to receive our news alerts.

Facebook Connect

Login with your JapanToday account

User registration

Articles, Offers & Useful Resources

A mix of what's trending on our other sites