Stunning 312,00 jobs created in December, far above forecasts

Andrew Cummings
January 7, 2019

Nonfarm payrolls surged by 312,000 jobs last month, the largest gain since February, as employment at construction and leisure and hospitality locations snapped back after being restrained by unseasonably cold temperatures in November.

"The drop in stock prices likely will depress the numbers somewhat over the next couple of months, but for now all the indicators of labour demand we follow are very robust", said Ian Sheperdson, chief economist at Pantheon Macroeconomics. "There is growing concern that the economy will slowdown significantly 2019".

Job gains were reported across all industries, with the exception of the information sector, which shed employment for the second straight month. Following modest gains of 0.2% in November, economists estimate average hourly earnings rose 0.3% last month. The Dow Jones industrial average shot up 747 points, or 3.3 percent.

The unemployment rate, which has remained at historic lows, inched up slightly last month - the greatest increases were seen among male workers.

The report flies in the face of the growing pessimism recently plaguing financial markets that the US economy is slowing and may even be slipping toward recession. The Labor Department has not been affected by the partial shutdown of the USA government and will continue to publish economic data complied by its statistics agency, the Bureau of Labor Statistics. That's because the data for Friday's report was collected before the shutdown started on December 22. Powell is due to appear on a panel with his two predecessors about two hours after the report's release.

The U.S. central bank raised rates four times in 2018.

US financial markets are projecting no rate hikes in 2019. "That's a deal we'll take if more people are participating in the workforce".

U.S. employers added 312,000 jobs in December, well above what economists expected and underlining that the American economy remains strong despite recent market turbulence.

Economists polled by Reuters had forecast private payrolls advancing 178,000 last month.

"The claims data suggest that conditions in the labor market have softened relative to a few months ago when the claims readings were very upbeat, but the extent of any deterioration is not entirely obvious and does not look extreme at this point", said Daniel Silver, an economist at JPMorgan in NY. "Too hot means fears of Fed tightening, too cool means fears of recession".

Growth forecasts for the fourth quarter are around a 2.6 percent annualized rate, with risks tilted to the downside amid fading stimulus from the Trump administration's $1.5 trillion tax cut package, a trade war with China and policy uncertainty in Washington. A month earlier, wages grew 0.2 percent. Some economists believe that the resulting tightening in financial market conditions could discourage the Federal Reserve from further raising interest rates this year. The government shutdown, if it extends beyond next week, could weigh on January payrolls.

"We expect the December employment report to remind markets that the USA growth outlook remains stable despite financial market volatility", he said. "That said, some crosswinds are beginning to brew, and the labor market needs to be carefully monitored over the coming months".

A large portion of the growth occurred in health care, construction, food services, retail trade and manufacturing. Retailers hired 23,800 more workers.

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