Ends with 312,000 Jobs Created in December

Ends with 312,000 Jobs Created in December

The US economy created many more jobs than expected in December.

Concerns about the economy had been boosted by surveys showing sharp declines in consumer confidence and manufacturing activity last month. The most recent inflation data from November using the Federal Reserve's preferred Personal Consumption Expenditure (PCE) price index found that prices increased by 1.8 percent - suggesting that real wages are rising (December inflation data will be available later this month). Revisions to the October and November estimates added an additional 58,000 jobs to the 2018 total.

A separate household survey released by BLS shows that although the unemployment rate increased by 0.2 percentage points (p.p.) to 3.9 percent in December, it went up for the right reasons: more workers are coming off the sidelines and looking for work, signaling that the US economy continues to hum along.

The BLS said the healthcare sector added 50,000 jobs in December and 346,000 jobs for the year, compared to just 284,000 new jobs in 2017. Retail trade employment, usually marked by larger swings in employment around the holiday season, added 23,800 jobs for the month. The labor force participation rate increased to 63.1% in December from 62.9% in November, as the participation rate for prime working-age persons (25-54 years old) increased to 82.3% in December. But Kevin Hassett, chairman of the White House Council of Economic Advisers, told reporters on Thursday that the next jobs report for January could be weak if the government shutdown continues.

The strong employment report likely keeps the Federal Reserve on course to continue raising interest rates this year, deepening its rift with Wall Street and President Donald Trump, who has chastised the Fed and its chairman, Jerome Powell, repeatedly for the rate increases. The Fed last month forecast two rate hikes this year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth. The plunge in the stock market, combined with weakening manufacturing readings and concerns over the trade dispute with China, led some to believe that a recession is around the corner in 2019. It is expected to slow to around 150,000 per month this year as workers become more scarce. The S&P 500 rose 3.4%, while the Nasdaq jumped more than 4.2%.

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"People should not get used to numbers like the one we saw this month", said Martha Gimbel, director of economic research at the jobs site Indeed.

The economy grew at a 3.4 percent pace in the third quarter.

The jolt in hiring offers a dose of reassurance after a tumultuous few months as the outlook from the financial markets has turned decidedly bleaker. That's still lower than it was a year ago, when the jobless rate was 4.1 percent and there were 6.6 million unemployed workers. It needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population. The government shutdown, if it extends beyond next week, could weigh on January payrolls. Construction employment rose by 280,000 jobs. Among health care sub-sectors, "home health care services" stood out with +13,000 jobs month-to-month. Builders added 38,000 construction jobs, while manufacturers increased their payrolls by 32,000 workers.

"The December jobs statement contains some positive news, yet these gains threaten to slip away because of the government shutdown".

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