Friday’s release of the December 2015 Jobs Report by the Bureau of Labor and Statistics gave renewed hope to many economists, and politicians, with the good news that 292,000 jobs were added, a figure which exceeded predictions of 211,000, and now brings the total, for 2015, to 2.65 million jobs, a boost to the U.S. economy, and the second best year since 1999.
For previous December reports, in 2013, it was 199,000 and in 2014, the number was 260,000, which gave general praise, from many quarters, with this report, especially from the federal government. “There are a lot of indicators that show the economy continues to move in the right direction,” U.S. Secretary of Labor Tom Perez told CNNMoney, echoing the optimism of many for the nation’s third straight month of gains.
With unemployment of 5% holding steady from the November report, many feel that despite global economic worries, and a downturn of the European markets, despite added concerns about the financial slowdown in China, this report represents a turning point for the American economy, from the grim days of the Great Recession.
The Obama administration noted, on the White House website, that “inflation-adjusted wages have generally been rising, and job growth has picked up in sectors that traditionally provide good, middle-class jobs.” The happy mantra, for them, as well as others: jobs are being created at a 1.9% annual rate, wages are growing at a rate of 2.3%, the unemployment rate fell at a surprisingly steady pace from a peak of 10% in October 2009 to 5% in October 2015 before remaining unchanged from last month. White House Press Secretary, Josh Earnest, said that with this report, “the American people can be justifiably excited.”
Yet, others, like Kit Juckes, a strategist at Societe Generale, were less sanguine about these stats, and felt that the real excitement lay elsewhere. He told The Wall Street Journal: “Why, given these incredibly boring and steady trends, would I look for either a dramatic acceleration in U.S. growth or a dramatic slowdown until something changes? The excitement therefore, comes from the base effect that means a modest 0.1% monthly increase would jump the annual wage growth up to 2.7%, its highest rate in the post-GFC era.”
One area that had tepid growth was wages, which for nonfarm payrolls, showed only a tiny increase of a penny, with a rate of $25.24, following an earlier increase of 5 cents from November. This brought the yearly increase, for average hourly earnings, to only 2.5 percent. Even in the private sector the change was only 2 cents.
Some analysts attribute this to foundational shifts in the economy, and others to a continuing slack in the job market which still has many involuntary part-time workers, (those that would prefer full time work, but can only find part time); plus those those jobseekers that have been so discouraged, they gave up looking. Some see this as the result of what is called the barbell effect, with high paying knowledge based jobs on one end, and manual employment on the others, but with little in between; and even some other observers attribute to to increasing automation, and offshore employment.
The bright spots were professional services, retail, hospitality, and travel and tourism, with the first showing an increase of 73,000 jobs. The losers were those jobs that were energy related, and in December, there was a loss of 8,000, bringing a grand total of 130,00 jobs cut from that industry, all due to the decreasing price of oil.
Despite those losses, “a strong economy, coupled with what appears to be a growing reluctance to announce layoffs during the holidays, contributed to December experiencing the lowest number of monthly job cuts in more than 15 years,” according to a report released by global outplacement consultancy Challenger, Gray & Christmas, Inc. According to their data, the average December job cut total from 2009 through 2015 was 34,046. That is 37 percent lower than an overall monthly average of 53,835 recorded during that period.
There was also significant progress for black unemployment which “fell to 8.3% in December from 9.4% in November. That’s still much higher than other demographics but a year ago the black unemployment rate was at 10.4%, “ according to CNN.
A major area of concern for many economists is the low level of participation in the labor market with 62.6 percent participation last month, an increase of only a tenth of a point from November, representing 94,103,000 and 94,446,000, respectively. For those that want to see an even lower rate of unemployment, say 3.8 percent, a sizeable increase in participation would be needed to reach that level. For example, while the rate of participation for twenty-five to fifty-four year olds is 80.8 percent, it’s still less than hoped for to meet pre-recession levels.
This is the first job report since the Federal Reserve increased interest rates last month, and they will undoubtedly be watching to determine future rate hikes, but the December numbers represent a vote of confidence in employment gains. But, even these figures are expected, as is usual, to be seasonally adjusted.