By guest author Natalie Kitroeff from New York Times
The Labour Department released its official hiring and unemployment figures for December on Friday morning, offering the latest picture of the American economy.
■ 312,000 jobs were added last month. Wall Street analysts had anticipated an increase of about 180,000. It was the biggest monthly gain since 324,000 jobs were added in February. Including revisions, the monthly average for October, November and December was 254000.
■ The unemployment rate rose to 3.9 %. November’s jobless rate was 3.7 percent.
The average hourly wage rose by 3.2 % from a year earlier.
In the last couple of months, as stocks swayed and concern over the prospect of a recession ensued, the labour market was relatively steady. And, December’s numbers ended the year with a flourish.
“It’s much higher than expected,” said Julia Pollak, a labour economist at the online employment market site ZipRecruiter. “The overall picture is that there is strong job growth on Main Street and it continues to be quite robust, despite uncertainty on Wall Street.”
The unemployment rate seems to have risen for good reasons — more people are being drawn into the job market, perhaps because of higher wages. The labour force grew by a healthy 419000 people last month.
Over all, employers added more jobs in 2018 than they did in 2017, at a monthly average of 220000. But last year was unique, because Congress passed a big corporate tax cut that essentially bathed a sizzling economy in lighter fluid. Optimism among consumers and businesses soared. Manufacturers and builders kept hiring despite trade tensions and a slowdown in the housing market.
“People got used to these eye-popping job-growth numbers,” said Martha Gimbel, director of research for the job-search site Indeed. Even if hiring slows in the coming months, she said, “it doesn’t mean that anything’s wrong, it just means we are heading back to normal.”
December’s figures do not account for workers furloughed during the government shutdown, which began after last month’s surveys were conducted.
Making Sense of the Tumultuous Markets
After a month of upheaval, stocks gained on Friday morning after the strong labour report, with the S&P 500 index adding more than 2 percent. But, even the best jobs numbers may not soothe investors for long.
“When market sentiment has gotten this negative, investors aren’t going to take one single data point and say: ‘Oh, we were wrong! Things are just fine,’” said Ellen Zentner, chief United States economist at Morgan Stanley. Markets can sink into pessimism much more quickly than they rise out of it, Ms. Zentner said. [The Federal Reserve chief said policy would “shift” as economic data warrants.]
Each month’s figures are revised twice, and provide snapshots of the past, not the future. Wall Street reacted badly Thursday to the release of the Institute for Supply Management’s monthly survey, which showed the biggest drop in manufacturing activity since 2008. (The index reading of 54.1 still showed an economy in expansion.) Measures of consumer and business confidence have also weakened recently.
Economists are not particularly troubled by that softening. They see it as a natural signal that the economy will grow more gradually this year. But investors have to weigh that interpretation — that the economy is peacefully drifting toward less exciting times — against the possibility that it is reeling toward calamity. It has not helped the mood of investors (or President Trump) that the Federal Reserve decided to raise its target lending rate four times in 2018.
The hard evidence in this report suggests that fears of a recession are overblown. Wall Street, of course, has the potential to create the bad news it seems to be anticipating. Consumers are much more likely to own homes than stocks. But, concern over withering retirement funds could prompt Americans to tamp down on spending. And, business owners might start to pull back on investments. The combination could eventually chip away at economic growth.
“There can be a vicious feedback loop, whereby markets can become self-fulfilling prophecies,” Ms. Zentner said.
A Banner Year
The unemployment rate hovers near a 50-year nadir. Job openings are at record highs, and a growing number of workers are quitting, a sign of confidence in the hiring outlook.
Even wages, which for months only inched up, have begun to pick up more quickly. Year-over-year wage growth in December, at 3.2 percent, tied October for the highest gain since 2009. The recovery has gone on for so long that it has finally begun to lift the lowest-paid workers, who have seen the biggest gains, and African Americans, whose jobless rate has reached record lows.
“2018 was a banner year for the labour market,” said Ms. Pollak of ZipRecruiter. And, while it’s hard to imagine the jobless rate dipping much lower, there are still Americans who either do not have jobs or are not clocking as many hours as they would like. The share of people have part-time positions but would prefer to work full time is higher today than it was in 2007.
A far smaller share of the American population is working today than before the recession. That decline is partly because of the aging of the baby boom generation. But, even among people in their prime working years, employment is down from before the recession, and far below its peak at the height of the dot-com boom. “We still have room to grow,” Ms. Pollak said. “We are not yet at maximum employment.”
The Shadow of the Trade War
Global growth is slowing. The Trump administration is waging a trade war with China. And, on Wednesday January, 2, 2018 Apple cut its revenue forecast for the first time in 16 years, citing flagging iPhone sales in China.
On Thursday January 3, Kevin Hassett, the Chairman of the White House Council of Economic Advisers, said on CNN that Apple would not be the only victim of tensions with Beijing. “There are a heck of a lot of U.S. companies that have a lot of sales in China that are basically going to be watching their earnings be downgraded next year until we get a deal with China,” Mr. Hassett told the network.
Mr. Trump has indicated that he would like to cut a deal with Beijing, and the market turmoil, along with Apple’s announcement, may add to the pressure to end the dispute.