Solid Job Gains in December Close Out 2019

Wage growth stumbles year-over-year

Roy Maurer By Roy Maurer January 10, 2020
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U.S. employers added 145,000 jobs in December 2019, capping a decade of robust job creation and keeping the country's longest economic expansion in history rolling along.

The latest Bureau of Labor Statistics (BLS) monthly report marked the ninth straight year that the economy has added more than 2 million jobs, although employment gains for 2019 represent the slowest annual pace since 2011. In 2019, payroll employment rose by 2.1 million, down from a gain of 2.7 million in 2018. The economy added a monthly average of 176,000 jobs in 2019, a decline compared to the 223,000 per month in 2018, but in line with the 179,000-monthly average in 2017.

"This final report [of the decade] is symbolic of the data we've seen over this decade-long expansion," said Nick Bunker, an economist at the Indeed Hiring Lab. "There continues to be slow but steady job growth and muted wage gains, but workers are still able to enter the labor market from the sidelines."

U.S. employers have added jobs for a record 10 years, pointing to steady economic growth heading into the new year, said Michael Stull, senior vice president, Manpower North America. "There is no question we've seen unevenness across industries and geographies over the last few months, yet it's clear the constant is employers are investing in talent to keep pace with the confident consumer."

The national unemployment rate remained unchanged in December at 3.5 percent, a 50-year low, and the number of people counted as unemployed was 5.8 million. A year earlier, the jobless rate was 3.9 percent, and the number of unemployed was 6.3 million.

Wage growth fell below the 3-percent mark for the first time since July 2018.

"The economy has nearly recovered its immediate pre-Great Recession health—wage growth … is a notable exception," said Elise Gould, senior economist at the Economic Policy Institute in Washington, D.C. "Many working people are still not seeing the recovery reflected in their paychecks—and the economy will not be at genuine full employment until employers are consistently offering workers meaningfully higher wages."

Julia Pollak, a labor economist at employment marketplace ZipRecruiter, summed up 2019 as a solid year for job growth in which monthly job gains averaged "way more than needed to keep pace with population growth."

She noted that the ratio of employed people of prime working age (25 to 54) to the overall population rose to 80.4 percent in December as more people entered the labor market. "And, by all indications, it is not done rising," she said. This influx of workers entering the labor market from the sidelines brought the labor force participation rate for prime-age adults up to 82.9 percent in December.

Josh Wright, chief economist for recruitment software firm iCIMS in Holmdel, N.J., pointed out that part-time employment dropped by 140,000, driving the underemployment rate down from 6.9 percent to 6.7 percent, the lowest measure on record. Long-term unemployment dropped by 33,000.

Another major labor market trend of the past year has been the emergence of women becoming the majority of job holders in the country, Pollak said. "Several previously male-dominated industries, like transportation, saw a jump in the female share of employment, partly thanks to new technologies and more flexible work arrangements."

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Retail Leads the Way

Wright said that when it comes to hiring by sector, "the fault lines in the economy were in sharp relief—weak goods-producing versus resilient service-providing, and low-wage industries outpacing high-wage."

December data showed that the leisure and hospitality sector added 40,000 jobs, health care added 28,000, and construction gained 20,000, the largest monthly increase since April. Manufacturing lost 12,000 jobs, bringing the annual total to just 46,000, compared to 246,000 in 2018.

Retail was the big surprise, jumping up to 41,000 jobs added, despite the fact that holiday hiring normally drops off in December, Wright said.

"Instead of seeing a repeat of the 2017 retail apocalypse, we are now seeing signs of stabilization in that industry," Pollak said. "Many brick-and-mortar retailers have made significant investments in improving the shopping experience at their stores and those investments seem to be paying off. Major retailers reported higher than expected in-store sales over the holiday season, even as e-commerce sales hit new records."

Wages a Sour Note

Experts agreed that the most disappointing number in the report was wage growth, which "likely reflects both a statistical quirk and the broader truth that the U.S. job market is not yet at full employment," Pollak said.

She explained that the wage growth measure tends to be artificially dragged down when pay day and the day the survey is conducted fall in different weeks.

Average hourly earnings increased 3 cents in December to $28.32. The 2.9 percent year-over-year gain is above inflation, but modest relative to other periods with historically low unemployment. Wages for frontline workers grew at a slightly faster rate, up 3 percent in December from a year earlier, but growth has cooled sharply from the 3.6 percent year-over-year increase reported in October.

"While we shouldn't overreact to one month of data, the fact that a variety of wage growth metrics show wage growth not picking up with 3.5 percent unemployment should be a topic of discussion," Bunker said.

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