U.S. December Employment Report: What You Need to Know

Posted on 03/09/2017 10:19 AM

December nonfarm payrolls: 156,000

Expectation: 175,000-180,000

What drove the increase: Job gains for 2016 totaled 2.2 million, or an average of just over 183,000. In 2015, the U.S. economy added 2.7 million jobs.

Health care continued to see considerable increases in jobs, with another 43,000 added during December. The sector added an average of 35,000 jobs per month in 2016, just below the 39,000 added per month in 2015.

Social assistance jobs rose 20,000 in December, under the average for the year and 2015. In 2016, social assistance added 92,000 jobs, down from an increase of 162,000 in 2015.

Jobs in the mining sector fell by 2,000 during December after having risen 3,000 in November.

Manufacturing employment rose 17,000, with a gain of 15,000 in the durable goods area. However, since reaching a recent peak in January, manufacturing employment has declined by 63,000.

October nonfarm payrolls were revised down to 135,000 (142,000 previously) while November was revised up to 204,000 (178,000 previously), for a net increase of 19,000 for the two months combined. Jobs gains averaged 165,000 for the final three months of 2016.

December Unemployment: 4.7 percent

Expectation: 4.7 percent.

What factored into the rise: The number of unemployed persons, at 7.5 million, changed little in December. However, both the number and the unemployment level edged down in the fourth quarter, after showing little net change earlier in the year.

The number of long-term unemployed (jobless for 27 weeks or more) was nearly unchanged at 1.8 million in December and accounted for 24.2 percent of the unemployed. In 2016, the number of long-term unemployed declined by 263,000.

The labor force participation rate moved up to 62.7 percent compared to 62.6 percent in November and was at the same level of 62.7 percent in December 2015.

The U-6 rate, the broadest measure of unemployment, fell to 9.2 percent in December after being at 9.3 percent in November. But this compares to 9.9 percent in December 2015. The December 2016 mark is the lowest since April 2008.

Wages moved up, with a 10-cent rise in average hourly earnings after a 2-cent fall in November. That pushed the annual rise to 2.9 percent, more in line with recent trends.

The average hourly workweek was steady at 34.3 hours.

Comments: While below expectations, the report signals a tightening US jobs market based on the smaller-than-expected rise in nonfarm payrolls and the increase in wages. This marked the 75th month of increases in nonfarm payrolls. And, the wage increase for the month was the strongest since 2009. Even though the headline number of jobs added was under expectations, taken together, the data still is a positive report.

This will back up the Fed's position that the jobs market is indeed tightening and should support their expectations of increasing the range on the Fed funds rate three times. But as noted in the Federal Open Market Committee (FOMC) minutes from their December session, the Fed finds itself in "uncertain" territory relative to the new administration and the potential for expansionary fiscal policy that could alter the economic results ahead in 2017.

Bond yields have increased in the wake of the data and stock futures were pointed higher in the wake of the data. Plus the US dollar has also gained while gold has eased lower. 


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