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December U.S. Employment, November International Trade

January 5, 2018
By Robert A. Dye, Ph.D., Daniel Sanabria

December Payrolls Up 148,000, Unemployment Rate Steady at 4.1 Percent

  • Payroll Employment increased by 148,000 jobs in December.
  • The Unemployment Rate for December was steady at 4.1 percent.
  • Average Hourly Earnings increased by 0.3 percent in December.
  • The Average Workweek in December was unchanged at 34.5 hours.
  • The U.S. International Trade Gap widened in November to -$50.5 billion. 

 

Job growth in December came in below expectations at +148,000 for the month. This is not a bad number, especially at this point in the economic cycle. However, the strong ADP jobs report for December, and other strong labor-related metrics for December, fostered rising expectations for December payrolls. The ADP survey for December, released yesterday, showed a sizeable 250,000 job net gain in private-sector employment in December. The unemployment rate was unchanged at 4.1 percent in December. We expect to see the unemployment rate continue to drift gradually lower through 2018, breaking below four percent before mid-year. The average workweek was unchanged at 34.5 hours in December. Average hourly earnings increased by nine cents, or 0.3 percent for the month. Over the previous 12 months, earnings are up 2.5 percent. Earnings will remain a focus for Fed watchers. Economic theory states that low unemployment will lead to higher wages, which will contribute to increasing inflation and justifies further fed funds rate hikes. However, the Fed’s favored measure of inflation, the trimmed-mean PCE price index continues to run below the Fed’s two-percent target, as it has for most of the past five years.

The establishment payroll data for December shows widespread gains across most industries, with the notable exception of retail. Retail employment fell by 20,300 in December, after seasonal adjustment, and despite the generally strong holiday shopping season. Mining and logging employment was unchanged in December. Other blue-collar industries did well. Construction gained 30,000 jobs and manufacturing employment was up by 25,000 for the month. Wholesale trade employment increased by 9,800 jobs. Transportation and warehousing jobs were up by 1,800. Information services gained 7,000. Financial services gained 6,000. Professional and business services employment was lackluster, gaining 19,000. Education and health care added 28,000 jobs. Leisure and hospitality served up 29,000 net new jobs for the month. Government added just 2,000. 

The U.S. international trade gap widened in November to -$50.5 billion, threatening to exert a noticeable drag on Q4 GDP growth. In November, imports increased by $6 billion as new cell phones were shipped in. Exports gained $4.4 billion with help from aircraft, autos and auto parts. If the trade gap continues to widen in December it will be a threat to a third consecutive near-3 percent real GDP growth quarter. 

Market Reaction: U.S. equity markets opened with gains. The 10-Year T-bond yield is steady at 2.47 percent. NYMEX crude oil is down to $61.53/barrel. Natural gas futures are down to $2.79/mmbtu.

For a PDF version of this report click here: Employment_01052018.

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