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Employment: Modest Gains, Wage Growth Decelerates

January 10, 2020

Bottom Line: Job gains were less than expected in December as the manufacturing sector shed jobs again after a strong November, when gains were due to the return of striking autoworkers. Wholesale trade and transportation jobs were also lower in December. Looking through the volatility, 4th Quarter job gains were very close to the six- and 12-month averages, suggesting labor markets were mostly stable at overall still strong levels (176k 12-month average vs. 223k in 2018 and 179k in 2017). The household employment tally in December was stronger, but so too was labor force growth, leaving the unemployment rate unchanged. Wage growth, meanwhile, saw a sharp deceleration. Average hourly earnings were up just 0.1% in December with the workweek nearly unchanged. Total paycheck growth decelerated sharply with year-on-year gains back near the averages of this cycle. Overall, this was a modest report -- following November's strong report, this leaves labor markets broadly steady at modestly slower but still overall strong levels.

Payroll Employment rose by 145k in December, compared with market expectations for an increase of 160k. The prior 2 months were revised, lower in November by 10k and lower in October by 4k.

Government jobs ROSE by 6k. Consequently, private sector jobs ROSE by 139k. Private education jobs rose by 1k. State and Local education jobs was nearly unchanged.

Overall employment is now 1.4% ABOVE its year ago level, Over the past 12 months, 2,108k jobs have been created.

  • In December, the job gains were in Retail Trade ( 41k ),
  • Professional & Business Services (+10k with the addition of 6.4k in Temp Help Services),
  • Leisure & Hospitality (+40k),
  • Education & Health Services (+34k),
  • Construction (+20k),
  • Financial Activities (+6k), andd Other Services (+5k).
  • Jobs were shed in Manufacturing (-12k) and
  • Trade, Transportation & Utilities (-1k)
The Unemployment Rate was UNCHANGED in December at 3.5%, compared with market expectations for a no change to 3.5%.

Household employment rose by 267k while the labor force increased by 209k, resulting in a decrease in the number of unemployed of 58k.

The Labor Force Participation Rate was UNCHANGED at 63.2%. The Employment-Population Ratio was UNCHANGED at 61.0%.

The number of people Working Part-Time for Economic Reasons FELL by 110k to 4,111k. while Long-Term Unemployment FELL by 33k to 1,186k (accounting for 20.6% of the unemployed), while the Mean Duration of Unemployment ROSE by 0.6 weeks to 20.8 weeks.

There are now 5.8 million people officially unemployed. In addition, there are another 4,832k people who say they want a job but are not currently looking for one. Finally, another 4,111k people are working part-time because of slack economic conditions.

The Index of Aggregate Hours ROSE by 0.1%, combining the modest gain in private payroll employment and the steady workweek.

Hourly Earnings ROSE by 0.1% in December, below market expectations of 0.3%. Hourly earnings are now 2.9% ABOVE their year ago level.

Weekly Earnings also ROSE by 0.1%, the result of the change in hourly earnings and a steady workweek. Weekly earnings are now 2.3% ABOVE their year ago level.

The Average Workweek was UNCHANGED at 34.3 hours, BELOW the market consensus at 34.4 hours.

Article by Contingent Macro Advisors