US employment growth slows in Dec
WASHINGTON (Reuters) — US employment increased less than expected in December but a rebound in wages pointed to sustained labor market momentum that sets up the economy for stronger growth and further interest rate increases from the Federal Reserve this year.
Non- farm payrolls rose 156,000 jobs last month, the Labor Department said on Friday. The gains, however, are more than sufficient to absorb new entrants into the labor market.
Fed chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the work-age population. Employers hired 19,000 more workers than previously reported in October and November.
“With wages on the rise and payrolls solid, the Fed is no doubt taking a healthy celebratory lap, feeling confident after this morning’s report in their decision to hike in December, and cautiously optimistic as they look out to the new year,” said Lindsey Piegza, chief economist at Stifel Fixed Income in Chicago.
The economy created 2.16 million jobs in 2016. Average hourly earnings increased 10 cents or four percent in December after slipping one percent in November. That pushed the year-on-year increase in earnings to 2.9 percent, the largest gain since June 2009, from 2.5 percent in November.
The unemployment rate ticked up to 4.7 percent from a nine-year low of 4.6 percent in November. Still, it remained below 4.8 percent, the Fed’s estimate of the natural rate of unemployment, for two straight months. Economists had forecast payrolls rising by 178,000 jobs last month.
The dollar rose against a basket of currencies on the data. Stocks on Wall Street ended higher, with the Standard & Poor’s 500 index hitting a record high and the Dow Jones industrial average flirting with the 20,000 mark.
Prices for US Treasuries fell, with the yield on the 30-year bond rising to three percent.
A broad measure of unemployment that includes people who want to work but have given up searching and those working part- time because they cannot find full-time employment fell one-tenth of a percentage point to 9.2 percent, the lowest rate in more than 8-1/2 years.
Other data on Friday showed the trade deficit widening 6.8 percent to $45.2 billion in November as imports rose to their highest level in over a year on rising oil prices.
The employment report added to data ranging from housing to manufacturing and auto sales in suggesting that President- elect Donald Trump is inheriting a strong economy from the Obama administration. The labor market momentum is likely to be sustained amid rising business and consumer confidence.
Trump, who takes over from President Barack Obama on Jan. 20, has pledged to increase spending on the country’s aging infrastructure, cut taxes and relax regulations. These measures are expected to boost growth this year.
“The report, the last one for the Obama administration, cements the president’s legacy of helping bring the country out of the Great Recession,” said Robert Murphy, an economics professor at Boston College.
A total of 11.3 million jobs were created during Obama’s term in office. Trump’s proposed expansionary fiscal policy stance could, however, increase the budget deficit.
That, together with faster economic growth and a labor market that is expected to hit full employment this year could raise concerns about the Fed falling behind the curve on interest rate increases.
Last month’s wage growth left it just shy of the three percent to 3.5 percent range that economists say is needed to lift inflation to the Fed’s two percent target.