Sunday, January 6,2019
Contrary to what the financial markets have been telling investors, Friday’s U.S. jobs report sent a powerful message about the strength of the economy. As Jim Baird, chief investment officer for Plante Moran Financial Advisors put it, “The economy has been slowing, but someone forgot to tell the labor markets.”
On Friday, the Bureau of Labor Statistics released a report that showed nonfarm payrolls surged by 312,000 in December. This number destroyed the pre-report estimate of 176,000 jobs.
Average Hourly Earnings also beat the forecast with wages jumping 3.2 percent from a year ago and 0.4 percent over the previous month. The data also showed the year-over-year increase is tied with October for the best since April 2009. Additionally, the average work week rose 0.1 hour to 34.5 hours. Traders had priced in 3 percent on the year and 0.3 percent from November.
The Unemployment Rate rose to 3.9 percent, higher than the 3.6 percent estimate. However, this number rose because 419,000 new workers entered the workforce and the labor force participation rate increased 63.1 percent. The Bureau of Labor Statistics report went on to say the participation level was up 0.2 percentage points from November and 0.4 percentage points compared with a year earlier. Economists projected the unemployment rate to fall to 3.6 percent.
Analysts and advisors were stunned by the bullish report with Paul Ashworth, chief U.S. economist at Capital Economics saying in a note that the report “suggests the U.S. economy still has considerable forward momentum.”
Ashworth also added, “The far bigger than expected 312,000 jump in non-farm payrolls in December would seem to make a mockery of market fears of an impending recession.”
Other Signs of a Hot Jobs Market
The Bureau of Labor Statistics report showed that payrolls growth totaled 2.6 million in 2018, the highest since 2015 and well above the 2.2 million in 2017.
Heath care led the job in new jobs, adding 50,000 in December. Restaurants and bars were next with 41,000 new jobs. The construction industry added 38,000 jobs in December. Manufacturing added 32,000 jobs for the month. The report also showed the sector saw a surge in 2018, with the 284,000 new positions representing a 37 percent rise from the previous year.
Finally, the government added 11,000 jobs last month.
Revisions, Revisions, Revisions
Adding to Friday’s bullishness were upward revisions to October and November’s numbers. October’s jobs count rose from 237,000 to 274,000, for a net gains of 58,000 from the previous tallies. November’s figures were raised from a disappointing 155,000 to a revised 176,000.