The U.S. posted its strongest year of job growth in 15 years and the unemployment rate fell to a post recession low last month. Nonfarm payrolls rose a seasonally adjusted 252,000 in December, the Labor Department said Friday, with broad-based gains across a wide array of sectors. Additionally, the unemployment rate fell .2% in December to 5.6%, which is its lowest level since June 2008.
Many executive recruiters we polled had predicted employment to rise by 240,000 in December and the unemployment rate to tick down to 5.7%. Furthermore, revisions by the Labor Department showed 50,000 more jobs added in October and November than previously estimated. November’s payroll gain of 353,000 was revised up from an initially reported 321,000. October’s payroll gain of 261,000 was revised up from 243,000. This is all better than expected.
Unfortunately, a lot of the decline was driven by people who stopped looking for work and are not even being counted by the Labor Department figures. Also, even with such a low unemployment rate, still nearly 8.7 million Americans who want a job can’t find one.
Moreover, many engineering recruiters, scientific recruiters, R&D recruiters, IT recruiters, technical recruiters and manufacturing recruiters in our executive recruitment network have found that earnings data continues to be rather disappointing. Most of us have not seen a broad-based increase in wages. Stagnant wages have limited household budgets and been a check on consumer spending. Average hourly earnings for private-sector workers fell 5 cents to $24.57 in December. The average workweek held steady at 34.6 hours in December. Over the past year, hourly earnings are up a mere 1.7%, barely ahead of inflation’s 1.3% rate. As a result, we cannot consider this employment report a total success.
Overall, though, Friday’s report was broadly positive and capped a solid year for the labor market. Altogether, employers added 2.95 million jobs in 2014, the biggest calendar-year increase since the figure topped 3 million in 1999. Of course, the U.S. population has grown significantly in that time, to more than 318 million in 2014 from 279 million in 1999, when the unemployment rate ended the year at 4.0%.
Recent labor-market gains underscore the relative strength of the U.S. economy, especially compared with Japan, nations in the Eurozone and many developing countries. U.S. gross domestic product, the broadest measure of output, expanded at a 5% pace in the third quarter, the strongest advance in 11 years.
Monthly job increases averaged 289,000 per month in the final three months of the year, compared with 246,000 per month for all of 2014 and 194,000 for 2013.
Friday’s report showed the strongest hiring in professional and business services in December, including fields such as administrative and waste services and computer system design. Construction, food services, health care, manufacturing and wholesale trade also posted gains.
If the economy continues to create jobs at this strong pace, wages should start to rise faster and more people could come off the sidelines. Labor-force participation rates are stuck near levels last seen in the late 1970s. The participation rate was 62.7% in December, down two-tenths of a percentage point from November and matching a 36-year low. Once people leave the workforce, they are no longer counted as unemployed.
Finally, a broader version of the unemployment rate, which includes involuntary part-time workers and people marginally attached to the labor force, was 11.2% last month, down from 11.4% in November.
WHAT ARE YOUR THOUGHTS?