05 Jan Economic Report: U.S. hiring slows at end of 2017 as job gains slacken to 148,000 in December
The U.S. economy added 2 million new jobs in 2017 for the seventh straight year.
The numbers: Job growth decelerated sharply in December. The economy created 148,000 jobs after averaging gains of 232,000 in the prior two months. Economists polled by MarketWatch had predicted a 198,000 increase in nonfarm jobs.
The unemployment rate, meanwhile, remained steady at 4.1%.
Wages increased by 2.5% over the past 12 months, up slightly from 2.4% in November, but still disappointing.
October and November job gains were trimmed by a net 9,000 jobs due to revisions.
The retail sector continued to struggle, while manufacturing had a solid month.
What happened: The mediocre increase in new jobs in December stemmed almost entirely from a surprising 20,000 decline in retail employment that does not appear to jibe with strong holiday sales even for many traditional brick-and-mortar stores.
“That’s hard to swallow and suggests that there must be something odd in the seasonal adjustment,” said Douglas Holtz-Eakin, president of the American Action Forum.
Other key segments of the economy continued to add workers to keep up with rising demand. Health-care providers hired 31,000 people, construction firms took on 30,000 workers and manufacturers filled 25,000 positions.
The big picture: Economists had expected hiring to slow at some point after the creation of 2 million new jobs for the seventh straight year. A slowdown is coming given the ultra unemployment rate, but it’s unclear if the softer December job gains are the start of the trend or just a blip.
There is reason to believe the hiring slowdown isn’t quite here yet.
The economy is on track in 2018 to become the second longest U.S. expansion ever and growth is strong domestically and globally. Businesses are using a variety of means to find labor, including retraining and reaching out to retired boomers. Recently enacted tax cuts will also give a boost to business.
Still, analysts think that it is only a matter of time before the jobless rate falls below 4%. That will put the Federal Reserve in a bind, especially if inflation remains subdued. Economists expect the Fed to hike rates in March.
What they are saying?: “Although today’s jobs number came in below the forecast, it is still a positive report with the unemployment rate remaining at 4.1 percent, wages gaining steadily and a strong upward revision to November’s number,” said Tony Bedikian, head of global markets at Citizens Bank.
“The U.S. economy continues to show strength and hopefully will pick up steam as we start the new year.”