Fewer Jobs Created in 2017 Than Preceding Year

Employment rose by 148,000 in December, unemployment held at 4.1 percent

Roy Maurer By Roy Maurer January 5, 2018

​U.S. employers created approximately 2.1 million jobs in 2017, coming up short compared with the 2.2 million jobs added in 2016, but the latest jobs report shows that the economy continues to expand in its ninth year of recovery. 

The Bureau of Labor Statistics (BLS) jobs report for December 2017 shows that employers added 148,000 jobs in the last month of the year, while unemployment remained at 4.1 percent, unchanged from November. The results mark the 87th consecutive month of job gains but came in under economists' expectations and fell off sharply from the revised November result of 252,000 new jobs.

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"It was the second-lowest growth of the year, once we exclude the most weather-sensitive sectors, but there's no cause for alarm," said Jed Kolko, chief economist for global job search engine Indeed. "Monthly payroll growth of 148,000 is still twice what we need to keep up with sluggish working-age population growth. Among prime-working age adults, both labor force participation and the employment-population ratio are at their highest in years."

Overall, the 2017 job market is a good story, said Cathy Barrera, chief economist for online jobs platform ZipRecruiter. "Seeing the unemployment rate at a 17-year low is fantastic," she said.

Kolko pointed out that some long-term labor-market trends reversed in 2017. "Middle-wage industries grew fastest last year, even though the longer-term trend is toward greater polarization with more growth at the top and the bottom than in the middle. And manufacturing job growth outpaced the overall economy in 2017 after losing jobs in 2016."

He also noted that wage and job gains "went to the people who needed them most—workers with less education."

Sectors reporting the biggest gains in December were health care (+31,000 jobs), construction (+30,000 jobs) and manufacturing (+25,000). Over the year, healthcare employers added 300,000 jobs, down from the 379,000 jobs created in 2016. The construction sector added 210,000 jobs in 2017, up from 155,000 in 2016, and manufacturing added 196,000 jobs during the year, a far cry from the 16,000 jobs lost in 2016.

"It was particularly exciting to see a strong year for manufacturing," Barrera said. "The growth in construction is great, however, a particularly bad year for hurricanes and wildfires did contribute to this growth. It will be interesting to see whether that growth continues without those negative shocks."

Retail employment bled 20,000 jobs in December. Employment in general merchandise stores declined by 27,000 over the month. Retail jobs were cut by 67,000 over the year, after increasing by over 200,000 in 2016. The consumer movement from shopping at brick-and-mortar stores to shopping online has led to over 7,400 store closures in 2017, according to global outplacement consultancy Challenger, Gray & Christmas. "The retail pivot that caused thousands of store closures and job cuts was not seen in any other industry this year," said John Challenger, CEO of Challenger, Gray & Christmas.  

Wages Bound to Rise

Some experts believe that 2018 will be the year that hourly wages get a healthy boost, due to the low unemployment rate and a tightening labor market.

Average hourly earnings rose by 9 cents in December, to $26.63, and by 2.5 percent, about 65 cents, over 2017. "On the month, 0.3 percent is respectable, but 2.5 percent on the year—well, it's a lot better than 2014's 1.7 percent, but it's just below 2015's 2.6 percent and a bitter disappointment compared to 2016's post-recession high of 2.9 percent," said Josh Wright, chief economist for recruitment software company iCIMS, based in Matawan, N.J.

Hourly earnings for workers at small businesses in December were $26.14, up 2.7 percent year-to-year and averaging an increase of 2.8 percent for 2017, according to Paychex, a payroll services company and IHS Markit, a business intelligence firm. Growth in weekly earnings picked up in construction during 2017, climbing from 2.9 percent this time last year to 3.5 percent.

"Keep in mind that the economy doesn't make decisions—people do—so wage adjustments are not automatic," Barrera said. "Small business owners and hiring managers are the ones who will ultimately make the choice to raise wage offers in order to attract talent, and it often takes people time to adjust to changing conditions on the ground. They may have been used to being able to recruit talent with only minor raises in wages. Only after they see that strategy being less effective in a tight labor market will they change course and boost those wages to recruit the talent that they need."

She pointed out that at the local level, places with the lowest unemployment rates are seeing wage growth well above the national average. The Minneapolis metropolitan area for example has a 2.4 percent unemployment rate—the lowest in the country among major metros—and wage growth around 4 percent, she said. 

Unemployment Holds Steady

The unemployment rate remained the same for the third consecutive month, according to BLS. The number of unemployed people stood at 6.6 million. Over the year, the unemployment rate fell by 0.6 percentage point, or by about 926,000 people.

Unemployment for teenagers fell back to what has become the norm of 13.6 percent in December, offsetting the sharp rise in teen joblessness (15.9 percent) recorded in November.

Significant drops in unemployment were also recorded for Asians, now at 2.5 percent and blacks at 6.8 percent, while the unemployment rates for adult men (3.8 percent), adult women (3.7 percent), Hispanics (4.9 percent) and whites (3.7 percent) stayed about the same.

Underemployment is an ongoing concern. The U-6 unemployment rate figure accounting for the unemployed plus people marginally attached to the labor force or working part time for economic reasons ticked up to 8.1 percent in December from 8 percent in November. This rise is "reaffirming expectations for the gig economy to become a larger portion of the labor market," Wright said.

The number of long-term unemployed—jobless for 27 weeks or more—dropped to 1.5 million people and accounts for 22.9 percent of the unemployed.

The number of individuals categorized as involuntary part-time workers—seeking full-time employment but working part time—ticked up to 4.9 million in December but was down by 639,000 over the year.

Additionally, 1.6 million people were considered marginally attached to the labor force; they are unemployed but want and are available to work, and had looked for a job sometime in the previous 12 months. Among this group, 474,000 individuals were considered discouraged—not currently looking for work because they believe no jobs are available for them.

The remaining 1.1 million people marginally attached to the labor force in December had not searched for work in the past month for reasons such as school attendance or family responsibilities, according to the BLS.

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