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Employment Situation: Headline Miss, But Solid 4th Quarter Labor Data Overall

January 5, 2018

Bottom Line: Payroll Employment rose by 148k in December, compared with market expectations for an increase of 190k. There were modest revisions to the previous two months which subtracted a total of 9k jobs. Still, job creation has averaged 204k over the past 3 months vs. the past 12 months average of 171k. Retail jobs, a source of difficult seasonal adjustments were a drag on gains, especially among department stores relative to online retail.

Hourly earnings rose moderately after a smaller increase in November. Weekly earnings rose 0.30%. The workweek was unchanged and the 3-month average is now 34.5.

Overall, while this report was a modest miss of expectations, the final quarter of 2017 ended with solid job gains, sharply above the average of the last 12-months. The strong gains in total aggregate weekly hours and modest wage growth left total paycheck growth in the fourth quarter also very solid.

Payroll Employment rose by 148k in December, compared with market expectations for an increase of 190k. The prior 2 months were revised, higher in November by 24k and lower in October by 33k. Government jobs ROSE by 2k. Consequently, private sector jobs ROSE by 146k.

Overall employment is now 1.4% ABOVE its year ago level, Over the past 12 months, 2,055k jobs have been created.

  • In December, the job gains were in Trade, Transportation & Utilities (+10k with -20k of those in Retail Trade),
  • Professional & Business Services (+19k with the addition of 7.0k in Temp Help Services),
  • Construction (+30k),
  • Education & Health Services (+29k),
  • Leisure & Hospitality (+29k),
  • Manufacturing (+25k),
  • Other Services (+12k), and
  • Information (+7k).

The Unemployment Rate was UNCHANGED in December at 4.1%, in-line with market expectations. Household employment rose by 104k while the labor force increased by 64k, resulting in a decrease in the number of unemployed of 40k.

The Labor Force Participation Rate was UNCHANGED at 62.7%. The Employment-Population Ratio was UNCHANGED at 60.1%.

The number of people Working Part-Time for Economic Reasons ROSE by 97k to 4,856k. while Long-Term Unemployment FELL by 78k to 1,515k (accounting for 23.0% of the unemployed), while the Mean Duration of Unemployment FELL by 1.6 weeks to 23.6 weeks.

There are now 6.6 million people officially unemployed. In addition, there are another 5,308k people who say they want a job but are not currently looking for one. Finally, another 4,856k people are working part-time because of slack economic conditions.

Hourly Earnings ROSE by 0.3% in December, in-line with market expectations of 0.3%. Hourly earnings are now 2.5% ABOVE their year ago level.

Weekly Earnings also ROSE by 0.3%, the result of the change in hourly earnings and a steady workweek. Weekly earnings are now 2.8% ABOVE their year ago level.

The Average Workweek was UNCHANGED at 34.5 hours, in line with the market consensus at 34.5 hours.

Article by Contingent Macro Advisors