The US economy added 145,000 jobs in December, the Bureau of Labor Statistics said Friday.
Although the headline number slightly missed economists’ expectations, the unemployment rate remained steady at 3.5%, a historic low. Over the past three months, an average of 184,000 new positions were added per month.
December’s jobs total was nearly 100,000 jobs fewer than in November, when workers returning from the General Motors (GM) strike boosted numbers. Hiring remained strong: As long as 100,000 jobs or more are added each month, the economy can keep up with new workers joining the labor force, Nela Richardson, investment strategist at Edward Jones, told CNN Business.
All in all, US employment rose by 2.1 million jobs in 2019, below the prior year’s 2.7 million gain.
“In our view, the labor markets stays healthy in 2020, but job growth will level off,” Richardson added.
“While job growth on average slowed in 2019 relative to 2018, and may slow further in 2020, if employment continues to grow steadily after the tenth year of economic expansion, it would still paint a relatively robust picture, and support US consumer strength,” said Robard Williams, senior vice president at Moody’s Investors Service.
Paychecks and Fed expectations
Paychecks rose less than expected in December, climbing only 0.1%. For the year, that puts wage growth at 2.9%, less than the expected 3.1%.
The good news is that inflation in America is also low, so even tepid growth in salaries helps household incomes rise. That is good for the economy, two-thirds of which is driven by consumer spending.
The Federal Reserve, which cut interest rates three times last year to boost the economy, is expected to keep monetary policy steady in 2020. With little inflation to worry about, this forecast seems realistic.
“The Fed seems comfortable with its neutral stance and will hold rates for the foreseeable future,” circa three to six months, said Minh Trang, senior FX trader at Silicon Valley Bank.
Pros and cons
The report was filled with bright spots: The retail sector went on a particularly strong hiring spree in December, thanks to a very strong holiday shopping season. A total of 41,000 retail jobs were added last month.
For the year as a whole, the number of underemployed people – those who would prefer a full-time job but can only find part-time work – fell by more than half a million people. It was little changed in December.
Yet jobs continue to evaporate in America’s battered manufacturing sector, which has struggled during the US-China trade war. The industry lost 12,000 jobs, compared with an expected increase of 5,000 new positions during the month.
During 2019, the sector added 46,000 jobs, less than a fifth of the 2018 number.
Construction was another sector that had a challenging year. Only 151,000 new building jobs were added in 2019, about half the prior year’s gains.
While mortgage rates remain low and incomes are rising, home building is being limited by material costs and a shortage of workers. The tight labor market is one piece of that puzzle. So is immigration policy.
“It hasn’t been a hospitable environment for migrant workers, which have boosted housing booms in the past,” said Richardson, the Edward Jones strategist.