Unemployment Rate Up Slightly, Economy Better?

In December, the American economy added only 156,000 jobs, ending President Obama’s final month in office in a somewhat lukewarm place. Indeed, even with the addition of these jobs, the national unemployment rate eked up to 4.7 percent, which is up from its lowest rate following the recession, 4.6 percent, according to the United States Department of Labor.

Job growth, thus, averaged only about 180,000 a month for the whole of 2016. That is massively lower than the average of 2015—229,000 jobs—but it is still enough to reduce the unemployment rate if sustained over time.

BMO Capital Markets senior economist comments, “While job growth has slowed somewhat, this is likely more due to a shortage of qualified workers rather than a lack of confidence among business leaders.”

After all, the health care sector led the hiring surge last month; adding 43,000 jobs in mostly hospitals and doctor’s offices. Manufacturing jobs were also back in upward flux after four months of cuts, with the addition of 17,000. Transportation and warehousing positions increased by 15,000 (thanks largely to increased online shopping over this holiday season) and even bars and restaurants added about 30,000 positions.

Jed Kolko is the chief economist at the job site Indeed. He comments, “More people are back at work than at any point since the recession. However, Trump will inherit an economy that’s riding high but faces long-term challenges. Fewer adults are at work than before the recession, manufacturing is lagging despite an uptick in December, and the acceleration in wage growth, while great for workers, could raise inflation fears.”

But another metric—and this is the one that people are more likely to follow—is faring a bit better than had been originally expected: average hourly earnings are increasing. In December, average hourly earnings rose by 0.4 percent to bring the 12-month rise to 2.9 percent. That is actually the best annual performance for this metric since the beginning of the recovery, in the middle of 2009.

Barclays chief economist for the United States, Michael Gapen, comments, “With the unemployment rate down and the labor market tighter, you would expect to see wages move higher, and that’s what the data is showing.” By his estimation, wages should rise about 3.5 percent in 2017; that would be the biggest such gain in almost ten years.

 

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