US December job report strong; unemployment rate at 5 pct

The December report marks the US economy’s second-best year of job growth since 1999, adding roughly 210,000 new positions per month.

“The broad economy continues to recover steadily”, commented James Glassman, head economist with JPMorgan Chase commercial banking in NY in a note published on december 29.

Theoretically the participation rate should start to move higher as unemployment drops.

USA payrolls for October and November were revised to show 50,000 more jobs created than previously reported, adding to the report’s upbeat tone. The unemployment rate was unchanged at 5%, as more people resumed looking for work, and down from 10% in October 2009.

Still, average hourly earnings actually slid by a penny to $25.24.

As such, wage growth will come under scrutiny.

Employment gains in December were probably concentrated in the services sector, with manufacturing and mining likely to have shed more jobs. There was a 45,000 jump in construction employment, with more increased expected (see below). For the year, factories added 30,000 jobs, down from 215,000 in 2014. “Today’s job numbers should be soothing to the FOMC, to markets, and to workers, and stand in sharp contrast to the negative economic news emanating from China”, said Beth Ann Bovino, chief USA economist at Standard & Poor’s Ratings Services.

Among the service providing industries, the food services and drinking places segment had a strong year, adding 357,000 jobs in 2015.

Caption + In this April 22, 2015 photo, Ralph Logan, general manager of Microtrain, left, speaks with James Smith who is seeking employment during a National Career Fairs job fair in Chicago.

The Fed based its December rate hike decision on the underlying strength of the USA labor market, and Friday’s report suggests that its confidence was not misplaced. Temporary help increased 34,400 last month and government payrolls rose 17,000. Overall, industries did not fare as well in 2015 compared to 2014, but industries like Mining (which includes oil and gas industries beset by low prices for oil) dragged employment growth in 2015.

“A stronger-than-expected headline increase coupled with a stable unemployment rate at a seven-year low, as well as slightly improved but slightly lower-than-expected wage growth, translates into a big “phew” for the Fed”, said Lindsey Piegza, chief economist at Stifel Fixed Income.

While average hourly earnings were flat in December, they were sharply higher than a year earlier and rose at a 2.5 percent annual rate in the fourth quarter, according to Reuters calculations of Labor Department data released on Friday. When jobs are added, people have more money in the wallets to spend, and American consumers are the major engine behind USA economic growth. Just this week, stock markets around the world panicked on fears that the global slowdown – led China and falling oil prices – is worsening.

The civilian labor force participation rate edged up a tenth of a point to 62.6 percent.

The weather also limited job gains in the leisure and hospitality sector, with employment rising 29,000 after increasing by 47,000 the prior month.

Wages in December grew 2.5 percent year-over-year, bringing average nominal wage growth in 2015 to 2.2 percent.