Unemployment rate held at a 17-year low
The pace of hiring slowed last month, but employers added better than two million jobs for the seventh straight year in 2017 and the unemployment rate held at a 17-year low.
Nonfarm payrolls rose a seasonally adjusted 148000 in December, the Labour Department said Friday. That brought employment gains for the year to 2.1 million. It is only the second time on record—the other being in the 1990s—when the economy has produced jobs at that pace for that long. Still, last year was the worst for payroll gains since 2010.
Meanwhile, the unemployment rate remained at 4.1 %, matching the lowest level since December 2000 for the third straight month. Hourly wage growth, from a year earlier, failed to accelerate, but wage gains look a bit better on a weekly basis, because Americans are working more hours.
Recent economic data “all point to an economy that has shifted into third gear in front of a large corporate tax cut that figures to turbocharge growth in the near term despite the modest deceleration in the pace of hiring in December,” said Joseph Brusuelas, chief economist at consulting firm RSM US.
Economists surveyed by The Wall Street Journal had expected 180000 new jobs and a 4.1 % unemployment rate in December. Revised figures show employers added 252000 jobs in November and 211000 in October, for a net downward revision of 9000.
The pace of job creation in 2017 suggests the expansion may have more room to run eight and a half years after the most recent recession ended. And the economy could get an additional boost as new tax laws go into effect. The changes cut taxes for most households, which could stimulate consumer spending, and are intended to incentivize businesses to hire and invest. An overly tight labour market may lead to wage and price inflation and cause the Federal Reserve to become more aggressive in tightening monetary policy. That could raise the risk of tipping into a recession.
The Fed raised the rate in December to a range between 1.25 % and 1.5 %, and penciled in three quarter-percentage point rate increases in 2018. So far wage pressures appear to be relatively subdued. Average hourly earnings for private-sector workers increased 9 US cents in December to USD 26.63. Wages rose 2.5 % from a year earlier.
Hourly wage growth has failed to match the prerecession pace, despite a lower unemployment rate. But the average workweek held at 34.5 hours for the second straight month, slightly elevated compared with earlier in 2017. Weekly wages increased 2.8 % from a year earlier, the second-best gain since early 2015.
Friday’s (January 5, 2018) report showed the employers added jobs in manufacturing, construction and health care. Employment fell in retail. All levels of government added a combined 2000 jobs to payrolls last month. December marked the 87th straight month employers added to payrolls, a streak nearly twice as long as the second-best run.
This current labour-market expansion is more notable for its length than its strength. Payrolls grew by better than 2.5 % annually, on average, during the economic expansions in the 1960s, 1980s and 1990s. Payroll growth has only topped 2 % for the year once in the current upturn, in 2014.
The share of Americans participating in the labour force held steady at 62.7 % in December. Participation has largely moved sideways the past two years, a positive sign that some Americans are being drawn in off the sidelines and helping to counter the trend of aging baby boomers retiring.
A broad measure of unemployment and underemployment that includes Americans stuck in part-time jobs or too discouraged to look for work increased in December to 8.1 % from 8.0 % the prior month.