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 Nonfarm payrolls increased by 292,000 last month, the Labor
Department said on Friday, as hiring got a boost from unseasonably
warm weather. 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 job market.
The robust employment data helped soothe fears about the economy's
health, and suggested recent weakness would largely be contained 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.
"It gives us a short-term shot in the arm and pushes back the idea
that we are headed for a global recession or that weakness in China
will sink our economy," says David Donabedian, chief investment
officer at Atlantic Trust Private Wealth Management in Baltimore.
Slumping oil prices and slowing growth in China have cast a pall on
the outlook for the global economy.
The upbeat employment report briefly helped staunch the bleeding on
Wall Street, but was offset by further declines in oil prices. The
dollar firmed against a basket of currencies as traders ramped up
bets the Federal Reserve would raise interest rates in March. Prices
for U.S. government debt rose on safe-haven bids.
Concerns about a slowdown in China, the world's second-largest
economy after the United States, have spooked investors worldwide.
But signs of stability emerged overnight after China ditched a stock
market circuit breaker and guided its currency higher.
U.S. payrolls for October and November 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.
Economists, who slashed fourth-quarter U.S. growth forecasts on
recent soft economic data, had expected payrolls to increase by only
200,000 last month. Fourth-quarter GDP growth estimates currently
range from as low as a 0.4 percent annual rate to as high as a 1.1
percent pace.
Though payroll growth was softer last year than in 2014, with 2.65
million jobs created compared with 3.1 million in the prior year,
the job gains in 2015 were still the second largest since 1999.
FOCUS ON WAGE GROWTH
While the labor market's resilience could spur Fed policymakers to
hike rates in March, some economists said low inflation and the
recent turmoil in financial markets could stay their hand.
"These figures obviously support a March rate hike from the Fed, but
... it is developments in inflation rather than the labor market
that will determine the pace of future rate hikes," said Paul
Ashworth, chief U.S. economist at Capital Markets in New York. "With
oil prices close to $30 a barrel now, this latest labor market
improvement doesn't necessarily guarantee a March rate hike."
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The U.S. central bank last month raised overnight 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.
With the Fed focused on inflation, wage growth is under scrutiny.
Economists said December's decline in earnings could simply be due
to a calendar-related quirk.
Despite that drop, the year-on-year gain moved up to 2.5 percent
from 2.3 percent in November, although that reflected an unusually
weak December 2014.
Also being watched closely 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 persistently low participation could hamper job
growth as the supply pool of workers shrinks, unless a pick-up in
earnings entices more Americans to return to the labor force. The
employment-to-population ratio increased to 59.5 percent last month,
its highest level since May 2009, from 59.4 percent in November.
Employment gains in December were concentrated in the services
sector, with mining shedding a further 8,000 jobs. Employment in the
mining sector declined by 129,000 in 2015 and more losses are likely
with oil prices at 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 and warm weather boosted
construction payrolls, which increased by 45,000. Retail payrolls
rose only 4,300 as mild temperatures hurt sales of winter apparel.
The weather also limited job gains in the leisure and hospitality
sector, with employment rising 29,000 after increasing by 47,000 the
prior month. Temporary help had a gain of 34,400 jobs last month and
government payrolls rose 17,000.
(Reporting by Lucia Mutikani; Editing by Tim Ahmann, Andrea Ricci
and Paul Simao)
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