The Corner

A Look at the December Jobs Report

While job growth continues to look like a plow horse, wage growth is starting to look like a thoroughbred. Payrolls grew a moderate 156,000 in December. But, like we mentioned last month, payrolls were revised up for November, north of 200,000 versus an original report of 178,000. Look for another upward revision, this time to December, one month from now.

Civilian employment, an alternative measure of jobs that includes small-business start-ups, rose a modest 63,000 in December. In the past year, payrolls are up 180,000/month while civilian employment is up 182,000/month. Look for similar gains in 2017.

The best news in today’s report, though, was on wages, which increased 0.4 percent in December and are up 2.9 percent from a year ago, the fastest growth so far in the economic expansion. Combined with data on the number of hours worked, total wages, which exclude fringe benefits and irregular bonuses/commissions, were up 0.6 percent in December and are up 4 percent versus a year ago, more than enough to outpace inflation. This will help keep the Federal Reserve on track for raising rates three times this year, like its “dot plot” suggested in December.

Although the unemployment rate ticked up to 4.7 percent in December, that follows a large decline to 4.6 percent in November. Overall, the jobless rate dropped 0.3 points in 2016 and we expect a similar gradual drop in 2017, as the labor force continues to grow. The labor force grew 1.8 million in 2016, the largest gain for any calendar year in the past decade.

Some analysts may claim most of the job gains in December were part time. But the data on full-time/part-time work are very volatile from month to month. In the past seven years (since December 2009), part-time jobs are up 416,000 while full-times jobs are up 13.7 million.

Other analysts will point out that the number of people not in the labor force (neither working nor looking for work) hit a new record high in December. But this was true in the 1990s and 2000s expansions as well, due to population growth. Now we have retiring Baby Boomers as well, who are also driving this trend.

The labor market is a still far cry from where it would be with a better set of policies, but it looks like some of these policies are on the way.

Robert Stein — Robert Stein is an economist for an asset-management firm and a former deputy assistant Treasury secretary for macroeconomic analysis.

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