Jobs report misses expectations, unemployment rate holds at 17-year low

  • The US economy created 148,000 jobs in December, fewer than economists had forecast.
  • The retail sector lost the most jobs amid a wave of store closings.
  • Still, December was the 87th straight month in which employers hired more people than they fired, extending the longest-ever stretch of job growth on record.

The US economy added 148,000 jobs in December, fewer than expected, according to a report Friday from the Bureau of Labour Statistics.

The unemployment rate remained at 4.1%, a 17-year low that supports the Federal Reserve’s assertion that the economy is near full employment. The black unemployment rate fell to a record low of 6.8%.

A plunge in retail jobs, by 20,300, weighed on the labour market as brick-and-mortar stores continued to close.

Still, December was the 87th straight month in which employers hired more people than they fired, extending the longest stretch of job growth on record. The economy created 2.06 million jobs last year.

Economists had forecast that 190,000 net nonfarm payrolls were added in December, according to Bloomberg.

“It’s a disappointment in the headline but on the other hand, lower payroll growth is exactly what we expect,” said Josh Wright, the chief economist at iCIMS. “We haven’t managed to sustain job growth of above 200,000 jobs per month for three months in a row since the end of 2015.”

Wage growth

The focus of Friday’s report was on wage growth. Average hourly earnings rose 0.3% month-on-month, little changed from November and as forecast, while they rose 2.5% from the previous year.

This still broadly reflects the sluggish pay increases we’ve seen through much of the recovery. With headline unemployment so low, employers should be competing for the best workers on pay. Some indicators like the Atlanta Fed’s alternative wage tracker do show this pay pressure.

Also, the average hourly earnings are skewed as older, better-paid workers retire and leave the equation.

“Average hourly earnings probably is one of our lowest-quality indicators because it doesn’t control for changes in composition,” Wright said. “Anecdotally, there are wage pressures growing, especially in particular industries and more so in some occupations like data scientists and programmers.”

Even after a slew of one-time bonus announcements since President Donald Trump signed the Tax Cuts and Jobs Act, it may take a while for workers to see sustained benefits from the lower corporate tax rate.

“Don’t expect to see much impact on either jobs or wages anytime soon from the tax bill,” Andrew Chamberlain, Glassdoor’s chief economist, wrote in a preview.

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