U.S. Employment (December 2019)

A decent end to 2019 for America's job market

• Non-farm payrolls rose by a moderate 145k in December, slightly below consensus expectations for 160k. That is a mild deceleration from November's hearty 256k tally. Hiring was revised down slightly (-14k) over the October-November period. On the plus side, the unemployment rate remained at the same 50-year low as in November at 3.5%.
• The Bureau of Labor Statistics made their routine, annual revisions to the Household Survey, which is used to calculate the unemployment rate. On net the revisions did not materially change the picture in 2019, which was that the unemployment rate fell modestly from 3.9% in December 2018 to 3.5% by the end of 2019. 
• Returning to December's details, notable job gains were seen in retail trade (+41k), health care (+28k), leisure and hospitality (+40k) and construction (+20k). Jobs were lost in manufacturing (-12k) and mining (-8k), which includes the oil and gas sector.
• Unfortunately wage growth disappointed. Average hourly earnings rose only 0.1% on the month, and are now up 2.9% year/year, a deceleration from 3.1% in November. 
• All in, 2019 was another pretty good year for job gains, with employment up 1.6% for the year as a whole. That is only a slight deceleration from a 1.7% pace in 2018. The year also ended on a reasonably solid note with payroll employment up 1.5% annualized in the fourth quarter. 
• The labor force participation rate was unchanged at 63.2%, but it is still up over the past year. 

Key Implications

• The headlines may focus on the disappointment in payrolls gains versus consensus, but overall December's job report was pretty solid. The main sore point is wage gains, which continue to be a bit modest given that the unemployment rate is at a 50-year low. This points to a job market that is less hot than the unemployment rate would suggest. 
• In fact, the share of prime-aged (25-54 yrs) Americans with a job only just passed its pre-recession high (from 2007) in December 2019 – eleven years into the economic recovery! With labor force participation rates in the U.S. trailing many of its advanced economy peers, we think there is room to make further gains in the year ahead. 
• All in, a low unemployment environment, and wage gains which are outpacing inflation give a decent backdrop for consumer spending heading into 2020. As outlined in our recent forecast, we expect the consumer to once again be a key support to growth this year. 
  
   

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