Three things we learned from the December jobs report
The final jobs report of President Obama’s presidency appears to be a mixed bag. On the one hand, the U.S. gained fewer jobs than expected: the economy added 156,000 jobs — around 20,000 to 30,000 fewer jobs than economists were expecting. The unemployment rate also ticked up slightly, from 4.6 to 4.7 percent.
On the other hand, wages in December rose 2.9 percent over the past year. It’s a yearly growth rate that we haven’t seen since 2009.
How are economists evaluating this report, and how far have we come since the first jobs report released during the Obama administration?
Service and manufacturing on the rise
Christopher Low, the head of FTN Financial, said job growth was on the soft side because retailers and package delivery companies added seasonal help early this year.
“If you look all the way back in September, there was a bigger than normal rise in temp hiring, and now in December, a weaker than normal rise,” Low said.
Among the jobs that were added, the service and manufacturing sectors experienced gains.
Manufacturing saw an increase of 17,000 jobs. Jay Bryson, managing director and global economist at Wells Fargo Securities, said that number suggests that U.S. manufacturing may be starting to strengthen again.
A tightening job market
Bryson said the wage growth is an indicator that the labor market is tightening.
But one problem with a tightening labor market is that it can become harder to find workers — especially higher-skilled workers to fill the jobs we need.
Jason Furman, chairman of the Council of Economic Advisers, said there is an upside.
“That’s why you’re getting the types of wage gains that we’re getting,” Furman said. “If you adjust for age, the labor force participation rate has been rising for the last two years. And that’s because we’re bringing people back in who want to work in the economy that we have today.”
There’s also the question of inflation. Furman said that as businesses have to pay more for workers, that will eventually start to feed into higher inflation.
Low said the 2.9 percent figure makes the wage growth rate “comfortably higher” than the rate of inflation. He said that the president of the Cleveland Fed, Loretta J. Mester, is known to be particularly nervous about inflation — yet she’s not worried.
“She saw this as a decent jobs report consistent with inflation,” Low said. “To me, it sounds like the Fed is very comfortable with this wage growth, which honestly it should be. With wage growth at about 3 percent, that is a level consistent in the past with inflation.”
Looking back
The first Obama administration jobs report, from January ‘09, saw a loss of 598,000 jobs and an unemployment rate of 7.6 percent.
“I’ve been here with President Obama for all eight years and to watch the economy add jobs for 75 straight months is completely thrilling,” Furman said.
Low noted this is a “remarkable turnaround.”
He said that wage growth around the time was 2.9 percent — a figure that would slow rapidly and eventually turn negative within a few months because of an unemployment glut.
“In the eight years that President Obama’s been in office, those people have been put back to work and the unemployment rate is back below 5 percent, which is the kind of conditions you need to start to see people getting decent raises again,” Low said.
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