The December Employment Report should keep the Fed on its plan to hike two more times in 2019, even though some of the jobs strength is probably make-up for November weakness and both months might have been impacted by weather (negatively in November, positively in December). The 2-month jobs pace is still strong, but the Report leaves open the door to the possibility that strong job growth is sustainable as a result of faster labor force growth.
The 312k m/m Payroll jump in December followed a below-trend +175k increase in November. About 1/3, if not somewhat more, of the jump were in sectors that had been weak in November. For example, Construction Jobs rose 38k after being flat in November. Some of the monthly volatility could be measurement problems. The opposite volatility is seen in the Household Survey's Civilian Employment, which measures number of people with jobs rather than number of jobs. Civilian Employment rose 142k in December after +221k in November.
Job growth is still strong after the m/m volatility is smoothed out. The 2-month average of Payrolls is +243k m/m, above the +223k 3-month average ending October.
Strong job growth is putting upward pressure on wages. While compositional and calendar factors likely contributed to the above-trend 0.4% m/m increase in Average Hourly Earnings, the y/y has moved up -- hitting 3.15% in December. But the increase in the y/y is modest. and could stay so. Better job opportunities and wage rates appear to be pulling people back in the labor force. The Labor Force Participation Rate jumped last month and boosted the Unemployment Rate to 3.9% -- back to the level that prevailed between April and July. A continuation of strong or rising labor force participation would temper further wage increases and allow for stronger non-inflationary economic growth than the Fed currently estimates to be the case.
The chances are for a slowdown in Average Hourly Earnings in January. Calendar considerations point to +0.1% m/m. There could be an unwinding of the composition shifts that boosted them in December. But, there also could be an offset from the end of lower-paid holiday workers.
No comments:
Post a Comment