The labor market is stronger than most assessments with December results well outside top-end estimates and big upward revisions underscoring the strength of prior months. Nonfarm payrolls jumped 292,000 in December which is 92,000 above the consensus. The gain importantly is led by professional & business services which is considered a leading component for future hiring and which rose 73,000 for the second outsized gain of the last three months. Construction, boosted by the nation’s unseasonable weather, has also been adding workers, up 45,000 in December. Upward revisions to the two prior months total 50,000 with November now at 252,000 and October over 300,000 at 307,000.
Despite payroll strength, the unemployment rate held steady at 5.0 percent as more people looked for work in the month. The labor force participation rate improved 1 tenth to 62.6 percent as did the employment-to-population ratio, to 59.5 percent. Wages, also despite the payroll strength, came in unchanged though the year-on-year rate, boosted by an easy year-ago comparison, rose 2 tenths to 2.5 percent which, however, is lower than many expected. The average workweek held unchanged at 34.5 hours while manufacturing hours slipped 0.1 percent which will pull down estimates for next week’s industrial production report.
Turning back to industry payrolls, the bureau of labor statistics is highlighting a 34,000 rise in temporary help services. This is a subcomponent of professional & business services and is considered an especially sensitive barometer for future hiring. Other industries posting gains include trade & transportation at 31,000, government at 17,000, and manufacturing at a modest 8,000. Mining payrolls, hurt by low commodity prices, continue to contract, down 8,000 and are one of the few industries in the minus column.
This report is strong and should confirm confidence that the U.S. economy is, or at least was in December, largely insulated against global weakness. The strength of this report is certain to grab global attention though the lack of wage punch underscores the two-track economy and the Fed’s dilemma — strong job growth but weak inflation.