Hiring surged in December, employers added 312000 jobs

Roman Schwartz
January 8, 2019

The strong labor market suggests the economy will continued to expand this year despite the ebb in consumer confidence, continued weakness in the housing market as well as cooling manufacturing activity.

The unemployment rate rose because more than 400,000 people joined the labor force looking for jobs.

US stocks rallied on the employment report on Friday and extended gains after Powell's comments.

Stocks surged on the news, along with word that the US and China will hold trade talks next week and comments from Federal Reserve Chairman Jerome Powell that the Fed will be flexible in judging whether to raise interest rates further.

"A substantial surprise in the jobs number, either higher or lower, would likely elicit a significant market reaction", economist Veronica Clark said in a note. That lifted the annual increase in wages to 3.2 percent, matching October's rise, which was the largest in 9-1/2 years.

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The unemployment rate nudged higher to 3.9%, but is still near historic lows.

Average hourly pay improved 3.2 percent from a year ago.

Several sectors saw a pickup in hiring.

The Institute for Supply Management (ISM) survey published on Thursday offered a downbeat assessment of the manufacturing sector, with nearly all components declining last month.

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"Incorporating revisions for October and November, which increased payrolls by 58,000, monthly job gains averaged 254,000 over the past 3 months", said William Wiatrowski, acting commissioner of the Bureau of Labor Statistics. That boosted job gains to an average 254,000 per month over the last three months.

"The ADP employment report has been susceptible to large swings in December that we think may be in part due to a year-end quirk that has tended to result in ADP printing high relative to payrolls in the final month of the year", said John Ryding, chief economist at RDQ Economics in NY.

This week, Apple cut its revenue estimates by billions of dollars, primarily because of weaker-than-expected iPhone sales in China due to that country's economic slowdown.

Major companies such as Apple say their sales are being jeopardized by the tariff war between Washington and Beijing, and an important gauge of US manufacturing posted its steepest decline in a decade Thursday.

The ripple effects from slower growth overseas could eventually hurt the US economy, David Dollar, a senior fellow at the Brookings Institution, told NPR's Scott Horsley. "And then, of course, that affects the whole world".

Stocks jumped Friday in response to the jobs figures.

Nonfarm payrolls probably increased by 177,000 jobs last month, according to a Reuters survey of economists, after rising 155,000 in November.

Still, other labor market indicators were strong in December, including consumers' perceptions of the job market. "Expectations regarding job prospects and business conditions weakened, but still suggest that the economy will continue expanding at a solid pace in the short-term", said Lynn Franco, a senior director at the Conference Board. The ISM manufacturing index fell 5.2 percentage points in December and an index measuring new orders tumbled 11 percentage points. The government shutdown, if it extends beyond next week, could weigh on January payrolls. There were also broad gains in hiring last month. The ADP report, which is jointly developed with Moody's Analytics, was published ahead of the government's more comprehensive employment report for December scheduled for release on Friday.

Unemployment dipped as low as 3.7 percent in 2018, the lowest mark since 1969. "What we don't know is how many more acts there are yet to come". The next GDP report, for the fourth quarter, is due January 30.

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