BackUS payrolls surge in December in boost to economic outlook
Nonfarm payrolls increase 292,000 in December while unemployment rate holds steady at 5%, easing concerns about the US economy's health
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Washington: US job growth surged in December and employment for the prior two months was revised sharply higher, suggesting that a recent manufacturing-led slowdown in economic growth would be temporary.
Nonfarm payrolls increased by 292,000 last month, the labour department said on Friday. The unemployment rate held steady at a seven-and-a-half-year low of 5% even as more people entered the labour force, a sign of confidence in the job market.
Payrolls for October and November were revised to show 50,000 more jobs created than previously reported, adding to the report’s upbeat tone. The only wrinkle was a one cent drop in average hourly earnings, but that was most likely because of calendar effects which should reverse in the January report.
The robust employment data should soothe fears about the economy’s health and suggests the recent weakness in activity is mostly limited to the manufacturing and export-oriented sectors, which have been hit by a strong dollar and anemic global demand. Efforts by businesses to whittle down an inventory glut and spending cuts by energy companies have also inflicted pain.
“It is one more sign the domestic economy continues to chug along," said Kate Warne, investment strategist at Edward Jones in St. Louis, Missouri. “It is not a game changer in terms of faster economic growth, but it offsets some of the other indicators that recently have suggested the economy might be slowing down."
In the wake of soft reports on manufacturing, construction spending and export growth, economists this week slashed their fourth-quarter growth estimates by as much a full percentage point to as low as a 0.4% annual rate. The economy grew at a 2% rate in the third quarter of last year.
Friday’s jobs report offered a respite to global stock markets after heavy selling this week sparked by signs of slowing growth in China. US stock index futures added to gains and the dollar rallied after the data, while prices of US treasuries pared losses. US short-term interest rate futures fell.
Economists had expected payrolls to increase only 200,000 last month and the unemployment rate to be unchanged at 5%. The US economy added 2.65 million jobs in 2015, compared to 3.1 million in 2014.
While labour market resilience would favour another interest rate hike from the Federal Reserve in March, economists say recent financial market turmoil and concerns among policymakers over low inflation suggest the US central bank may stay on the sidelines a bit longer.
The Fed last month raised overnight interest rates by a quarter percentage point to between 0.25 and 0.50%, the first increase in nearly a decade, and a subsequent move at its next meeting this month was already seen as off the table.
Wage growth will come under scrutiny this year. Despite the drop in average hourly earnings in December, the year-on-year gain in earnings was 2.5% in December compared to 2.3% in November. That was mostly because wages were unusually weak in December 2014.
Wage growth is expected to accelerate by the middle of the year as the labour market settles into full employment.
Also being watched closely this year is the labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job. While the rate increased one-tenth of a percentage point to 62.6% in December, it remains near four-decade lows.
There are concerns that persistently low participation could hamper job growth as the supply pool of workers shrinks, unless a pick-up in earnings entices more Americans to return to the labour force. The employment-to-population ratio increased to 59.5%, the highest since May 2009, from 59.4% in November.
Employment gains in December were concentrated in the services sector, with mining shedding 8,000 jobs. Employment in the mining sector declined by 129,000 in 2015 and more losses are likely after the price of oil this week tumbled to an 11-year low.
Oilfield services provider Schlumberger last month announced another round of job cuts in addition to 20,000 layoffs already reported in 2015. The company said it expected the slowdown in drilling activity to continue this year.
Manufacturing added 8,000 jobs last month. Unusually warm weather boosted construction payrolls, which increased by 45,000. There were also gains in the leisure and hospitality sector.
Retail payrolls rose only 4,300 as mild temperatures hurt sales of winter apparel. Temporary help increased 34,400 last month and government payrolls rose 17,000. The average workweek was unchanged at 34.5 hours. Reuters
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