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 Nonfarm payrolls increased by 292,000 last month, the Labor
Department said on Friday. The unemployment rate held steady at a
7-1/2-year low of 5 percent even as more people entered the labor
force, a sign of confidence in the labor market.
October and November payrolls were revised to show 50,000 more jobs
created than previously reported, adding to the report's upbeat
tone. The only wrinkle was a one cent drop in average hourly
earnings, but that was most likely because of calendar effects which
should reverse in the January report.
The solid employment data should soothe fears over the economy's
health and suggests the recent weakness in activity is mostly
limited to the manufacturing and export-oriented sectors, which have
been hit by a strong dollar and anemic global demand. Efforts by
businesses to whittle down an inventory glut and spending cuts by
energy companies have also inflicted pain.
In the wake of soft reports on manufacturing, construction spending
and export growth, economists this week slashed their fourth-quarter
growth estimates by as much a full percentage point to as low as a
0.4 percent annual rate. The economy grew at a 2 percent rate in the
third quarter of last year.
The closely monitored jobs report could offer a brief respite to
global stock markets after heavy selling this week sparked by signs
of slowing growth in China.
While labor market resilience would favor another interest rate hike
from the Federal Reserve in March, economists say financial market
turmoil and concerns among policymakers over low inflation suggest
the U.S. central bank may stay on the sidelines a bit longer.
The Fed last month raised overnight interest rates by a quarter
percentage point to between 0.25 and 0.50 percent, the first
increase in nearly a decade, and a subsequent move at its next
meeting this month was already seen as off the table.
Wage growth will come under scrutiny this year. Despite the drop in
average hourly earnings in December, the year-on-year gain in
earnings was 2.5 percent in December compared to 2.3 percent in
November. That was mostly because wages were unusually weak in
December 2014.
Wage growth is expected to accelerate by the middle of the year as
the labor market settles into full employment.
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Also being watched closely this year is the labor force
participation rate, or the share of working-age Americans who are
employed or at least looking for a job. While the rate increased
one-tenth of a percentage point to 62.6 percent in December, it
remains near four-decade lows.
There are concerns that persistently low participation could hamper
job growth as the supply pool shrinks, unless a pick-up in earnings
entices more Americans to return to the labor force.
Employment gains in December were concentrated in the services
sector, with mining shedding 8,000 jobs last month. Employment in
the sector declined by 129,000 in 2015. More losses are likely after
the price of oil this week tumbled to an 11-year low.
Oilfield services provider Schlumberger last month announced another
round of job cuts in addition to 20,000 layoffs already reported in
2015. The company said it expected the slowdown in drilling activity
to continue this year.
Manufacturing added 8,000 jobs last month. Unusually warm weather
boosted construction payrolls, which increased 45,000. There were
also gains in the leisure and hospitality sector.
Retail payrolls rose only 4,300 as mild temperatures hurt sales of
winter apparel.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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