WASHINGTON, Jan 10 — US job growth slowed more than expected in December, but the pace of hiring remains more than enough to keep the longest economic expansion in history on track despite a deepening downturn in a manufacturing sector stung by trade disputes.
The Labour Department’s closely watched monthly employment report today also showed the jobless rate holding near a 50-year low of 3.5 per cent. A broader measure of unemployment dropped to a record low 6.7 per cent last month, though wage gains ebbed. The report will probably not change the Federal Reserve’s assessment that both the economy and monetary policy are in a “good place.”
Nonfarm payrolls increased by 145,000 jobs last month, with manufacturing shedding jobs after being boosted in November by the return to work of about 46,000 production workers at General Motors after a strike, the government’s survey of establishments showed. Milder-than-normal temperatures in December boosted hiring at construction sites.
Some of the slowdown in December is likely due to seasonal volatility associated with a later-than-normal Thanksgiving Day.
Economists polled by Reuters had forecast payrolls rising by 164,000 jobs in December. Roughly 100,000 jobs a month are needed to keep up with growth in the working-age population.
Data for October and November was revised to show 14,000 fewer jobs added than previously reported. The economy created 2.1 million jobs in 2019, down from 2.7 million in 2018.
Worries that a downturn might be triggered by the Trump administration’s trade war with China spurred the Fed to cut interest rates three times in 2019. Indeed, economic growth did slow last year, throttling back to 2.1 per cent in the third quarter from 2018’s pace of nearly 3 per cent.
Now, though, with a Phase 1 deal with China set to be signed next week, policymakers are more confident in the outlook and last month signalled borrowing costs could remain unchanged at least through this year. Economists are pegging growth at the end of last year around a 2.3 per cent rate.
The labour market has continued to churn out jobs at a healthy clip, despite anecdotal evidence of worker shortages, which economists had feared would significantly restrain hiring.
There are, however, concerns the Labour Department’s Bureau of Labour Statistics (BLS), which compiles the employment data, may not be fully capturing the impact on payrolls of President Donald Trump’s 18-month-long trade war with China, which has pushed manufacturing into recession and led to company closures.
The government last August estimated that the economy created 501,000 fewer jobs in the 12 months through March 2019 than previously reported, the biggest downward revision in the level of employment in a decade. That suggests job growth over that period averaged around 170,000 per month instead of 210,000. The revised payrolls data will be published next month.
The projected massive revision has attracted the attention of some Fed officials. Minutes of the US central bank’s December 10-11 policy meeting published last week showed a “couple” of officials viewed the anticipated downgrade as an indication “that payroll employment gains would likely show less momentum coming into this year.”
Economists say downward revisions of that magnitude are often associated with early signs of a recession and suggest that the model the government uses to calculate the net number of jobs from new business and closings is faulty.
Some expect payrolls growth beyond last March could also be revised down. For now, the labor market is on solid footing, with the unemployment rate declining by five-tenths of a percentage point 2019. There was little impact on the jobless rate from annual revisions to the seasonally adjusted household survey data going back five years, which were incorporated in December’s employment report.
A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell to 6.7 per cent in December, the lowest since the series started in 1994, from 6.9 per cent the prior month.
The tight labor market, however, has not generated strong wage inflation. Average hourly earnings rose three cents, or 0.1 per cent, after increasing 0.3 per cent in November. In the 12 months through December, wages rose 2.9 per cent after gaining 3.1 per cent in November.
Manufacturing employment dropped by 12,000 jobs in December after jumping 58,000 in November as the GM strike ended. The industrial sector has been hurt by the US-China trade war.
The Institute for Supply Management’s measure of national factory activity dropped in December to its lowest level since June 2009. The ISM’s gauge of manufacturing employment contracted for a fifth consecutive month.
Hiring at construction sites increased by 20,000 jobs in December. Government employment rose by 6,000 jobs. It is expected to accelerate in the coming months amid increased hiring for the 2020 Census. — Reuters
