December employment gain caps best year for U.S. since 1999

January 9, 2015 08:12 AM

Employment rose more than forecast in December and the jobless rate declined to 5.6 percent, wrapping up the best year for the labor market since 1999 and adding to evidence the U.S. is a standout in the global economy.

The addition of 252,000 jobs followed a 353,000 rise the prior month that was more than previously estimated, a Labor Department report showed today in Washington. The jobless rate dropped the lowest level since June 2008. The report wasn’t all good news as earnings unexpectedly declined from a month earlier.

An additional 2.95 million Americans found work in 2014, the most in 15 years and a sign companies are optimistic U.S. demand will persist even as overseas markets struggle. The combination of job growth and cheaper gasoline will probably help stretch workers’ paychecks and sustain consumer spending.

“We have continued, solid job growth,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, who projected a 240,000 gain. “It shows really solid momentum in U.S. growth. There are not a lot of places in the world where we see that these days. The oddity in the report is the move down in average hourly earnings.”

Job growth last month was highlighted by the biggest gain in construction employment in almost a year. Factories, health care providers and business services also kept adding workers in December.

The median forecast in a Bloomberg survey of economists called for a 240,000 advance in payrolls. Estimates of 99 economists ranged from gains of 160,000 to 305,000 after a previously reported 321,000 November increase.


Prior Months

Revisions to prior reports added a total of 50,000 jobs to overall payrolls in the previous two months.

Stock-index futures erased losses after the report. The contract on the Standard & Poor’s 500 Index expiring in March climbed 0.3 percent to 2,061.2 at 8:38 a.m. in New York. The yield on the benchmark 10-year note retreated to 1.99 percent from 2.02 percent late yesterday.

The unemployment rate, which is derived from a separate Labor Department survey of households, was projected to drop to 5.7 percent from 5.8 percent, according to the survey median.

Average hourly earnings for all employees dropped by 0.2 percent, the biggest since comparable records began in 2006, to $24.57 from the prior month. Earnings rose 0.2 percent in November. They increased 1.7 percent over the 12 months ended in December, the smallest gain since October 2012.

In accordance with usual practice, the December jobs report also incorporated annual revisions in seasonally adjusted household survey data. Figures for January through November showed very little change from previous estimates.


Participation Rate

The participation rate, which indicates the share of working-age people in the labor force, decreased to 62.7 percent from 62.9 percent.

Construction companies added 48,000 workers last month, the most since January. Factories increased payrolls by 17,000 in December.

Wage gains have lagged behind the pace of employment growth. Increased incomes, combined with the cheapest fuel costs since 2009, are needed to help lay the ground work for a pickup in the household spending that accounts for about 70 percent of the economy.

The outlook is improving for earners at the lowest end of the income ladder. Voters approved ballot measures and legislatures enacted laws that allowed the minimum wage to rise in almost half of U.S. states on Jan. 1. The advances may be reflected in the wage data in the jobs report for January.


U.S. Resilience

Stronger employment growth underscores the U.S. economy’s resilience in the face of cooling markets that stretch from Europe to China.

Greenbrier Cos. is among companies that are expecting stronger domestic demand. The Lake Oswego, Oregon-based supplier of railroad equipment boosted its annual forecast after reporting a record backlog in the first quarter.

“Macro-economic conditions indicate strength and expansion for the U.S. economy in 2015 and beyond, with lower energy prices creating a strong impetus for auto production, consumer spending and overall growth,” William Furman, chief executive officer, said in a statement on Jan. 7.

Businesses reducing staff include J.C. Penney Co., a department-store chain that said it will close 40 stores this year and cut as many as 2,250 jobs as it continues its attempted turnaround.

Federal Reserve policy makers last month noted the improvement in the job market that’s underpinning growth in the sixth year of the expansion.

“Underutilization of labor resources continues to diminish,” the officials said in a statement after their December meeting. They also said they will be “patient” on the timing of the first interest-rate increase since 2006. Minutes of the meeting released on Jan. 7 showed that being deliberate on interest rates means no increase before late April.


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