December Employment Roars

Nonfarm payroll employment increased by 312,000 in December, far exceeding expectations, the Labor Department reported Friday.

Despite the jump, the unemployment rate rose by two-tenths of a percent to 3.9 percent, which officials attributed to more Americans entering the workforce. Job gains occurred in health care, food services and drinking places, construction, manufacturing and retail trade.

BLS said the change in nonfarm payroll employment for November was revised up from +155,000 to +176,000; the change for October was revised up from +237,000 to +274,000. With these revisions, employment gains in October and November combined were 58,000 more than previously reported. After revisions, job gains have averaged 254,000 per month over the past three months.

Economists had expected about 182,000 jobs to be added last month.

The report did not include the impact of about 380,000 federal workers who were furloughed in December because of the government shutdown. That’s because the data for Friday’s report was collected before the shutdown started on December 22.

The report said the labor force participation rate rose to 63.1 percent in December, its highest level since 2014, from 62.9 percent in November.

“Every aspect of the December jobs report was strong: more jobs, more people looking for work, and the fastest wage growth since 2009,” said Mike Fratantoni, Chief Economist with the Mortgage Bankers Association. “This is good news for the housing market, where the strong job market boosts the confidence of potential homebuyers. The strong reading was certainly needed, given the incredible stock market volatility this past month.”

The report said the number of long-term unemployed (those jobless for 27 weeks or more) was little changed in December at 1.3 million and accounted for 20.5 percent of the unemployed. Over the year, the number of long-term unemployed fell by 205,000.

The construction industry added 280,000 jobs in 2018, compared to 250,000 in 2017. Over the month, employment in professional and business services continued to trend up (+43,000). The industry added 583,000 jobs in 2018, outpacing the 458,000 jobs added
in 2017. Employment in other major industries, including mining, wholesale trade, transportation and warehousing, information, financial activities and government, showed little change over the month.

BLS reported the average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.5 hours in December. In manufacturing, both the workweek and overtime increased by 0.1 hour to 40.9 hours and 3.6 hours, respectively. The average workweek for production and nonsupervisory employees on private nonfarm payrolls held at 33.7 hours. Average hourly earnings for all employees on private nonfarm payrolls rose 11 cents to $27.48. Over the year, average hourly earnings have increased by 84 cents, or 3.2 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 9 cents to $23.05 in December.

“Overall, the labor market remains strong and is supportive of the Federal Open Market Committee raising rates further in 2019,” said Sarah House, senior economist with Wells Fargo Securities, Charlotte, N.C. “After stoking concerns about a broadening slowdown in the economy last month, the employment report for December walked back any signs of the labor market cooling.”

“The tug-of-war between household income and mortgage rates that had been influencing consumer house-buying power took a hiatus,” noted Mark Fleming, chief economist with First American Financial Corp., Santa Ana, Calif. “Instead, the decreasing rates and rising wages both helped to increase consumer house-buying power over the previous month.”

“With mortgage rates about a half point lower than late last year, the Fed likely to move more slowly going forward, and home-price growth slowing a bit, today’s report points to a still strong job market that should support a solid spring housing market in 2019,” Fratantoni said.