Job market growth softened moderately in December as the economy added 156,000 new jobs, below expectations of 175,000 for the month. However, October and November payrolls were revised higher by 19,000, putting the expectation for total payrolls to end the year in line with economist expectations.
The unemployment rate edged upward to 4.7 percent, but remained below the 5.0 percent threshold for the eighth consecutive month based on the revised data contained in today’s report. That uptick reflected a comparable increase in the labor force participation rate – an esoteric statistic that estimates the portion of the population that is part of the labor force. Even with that modest uptick, the jobless rate is reflective of strong labor market conditions.
For the year, the economy averaged job creation of about 180,000 per month – a solid result, but one that represents the slowest pace since 2012. While this is partially reflective of the slowdown in the pace of economic growth, it also reflects a labor market that is increasingly tight. Employers are simply having a harder time filling open positions as the economy nears full employment.
There are other indications that the labor markets are increasingly tight, creating an increasingly positive backdrop for workers. Average hourly earnings increased by 0.4 percent last month, lifting the gain for the year to over 2.9 percent. For the last several years, wage gains have been soggy as the ranks of the unemployed were gradually reduced. Economists have long expected a pickup in wages as the jobless rate came down; that expectation appears to be finally coming to fruition, with wage gains reaching its strongest rate since 2009.
The bottom line is that – despite the erratic path of headline economic growth last year – job creation and overall labor market conditions remain solid. For the past several years, the strength of labor market conditions has been a bright spot for the economy. With the potential for stronger fiscal stimulus in the form of infrastructure spending and tax cuts, job creation appears likely to remain on a solid footing in 2017.