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Friday, January 04, 2019

Comments on December Employment Report

by Calculated Risk on 1/04/2019 10:00:00 AM

The headline jobs number at 312 thousand for December was well above consensus expectations of 180 thousand, and the previous two months were revised up 58 thousand, combined. However, the unemployment rate increased to 3.9%. This was a strong report.

Earlier: December Employment Report: 312,000 Jobs Added, 3.9% Unemployment Rate

In December, the year-over-year employment change was 2.638 million jobs. That is solid year-over-year growth, and makes 2018 the third best year for employment growth in the current expansion (behind 2014 and 2015).

Average Hourly Earnings

Wage growth was above expectations in December. From the BLS:

"In December, 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."
Wages CES, Nominal and RealThis graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 3.2% YoY in December.

Wage growth has generally been trending up.

Prime (25 to 54 Years Old) Participation

Employment Population Ratio, 25 to 54Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate increased in December to 82.3%, and the 25 to 54 employment population ratio was unchanged at 79.7%.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
"The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 4.7 million, changed little in December but was down by 329,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. "
The number of persons working part time for economic reasons has been generally trending down.  The number decreased in December. The number working part time for economic reasons suggests there is still a little slack in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 7.6% in December.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.306 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 1.259 million in November.


The headline jobs number was well above expectations.  However, the headline unemployment rate increased to 3.9%. Also wage growth was above expectations, and above 3% YoY for the third consecutive month.

Overall, this was a strong report.   For 2018, job growth was been solid, averaging 220 thousand per month.