U.S. payrolls rise 228,000 while wages gain less than forecast

Written on Dec 15, 2017

After a fall filled with hurricane disruptions, the U.S. labor market has resumed the status quo: solid hiring but tepid wage gains that suggest things aren’t as tight as the unemployment rate suggests.

Payrolls rose 228,000 in November, above the median economist estimate of 195,000, Labor Department figures showed Dec. 8. Average hourly earnings increased 2.5% from a year earlier, less than the 2.7% projection, and October’s figures were revised lower. The jobless rate held at 4.1%, the lowest since late 2000.

A separate report showed U.S. consumer sentiment dipped for a second month while remaining around levels consistent with a steady economy and solid job market, with stocks near record highs. The University of Michigan’s preliminary December gauge fell to 96.8, compared with the median estimate of economists for 99, as optimism waned and inflation expectations rose.

Average hourly earnings rose 0.2% from the prior month following a revised 0.1% drop, the report showed. Analysts had penciled in a gain of 0.3% for November. The gain from a year earlier followed a downwardly revised 2.3% advance for October.

Economists expect that in time, wages will post a sustained pickup, which has remained elusive in this expansion even though labor-market slack is steadily disappearing. Faster gains in paychecks would boost consumer spending, which accounts for about 70% of the economy.

The Trump administration has said the tax-cut proposal in Congress, if it gets signed into law, will spur growth and boost wages, though economists generally expect a modest impact.

Several measures showed the labor market remains fairly steady. The two-month gain in payrolls was the strongest since mid-2016. The U-6, or underemployment rate, remained near the lowest since 2006, while the participation rate, or share of working-age people in the labor force, was unchanged at 62.7%.

The breakdown of data showed healthy gains across many industries, particularly in manufacturing and construction. Health care and professional and business services also showed solid gains. Restaurants and bars, which had showed bigger swings in the prior two months due to the storms, added 18,900 workers in November.

Revisions to prior reports added a total of 3,000 jobs to payrolls in the previous two months, according to the report.

Steady household demand and a pickup in business investment -- backed by elevated consumer and business sentiment and improving global demand -- bode well for U.S. employment.

Even with the above-forecast gain in November, payroll increases have been slowing the past few years, albeit in orderly fashion, as the labor market tightens. Economists say job gains above 100,000 a month are still enough to keep putting downward pressure on the jobless rate.

Additional details:

  • The U-6 underemployment rate rose to 8% from 7.9%; measure includes part-time workers who’d prefer a full-time position and people who want a job but aren’t actively looking
  • Manufacturing payrolls rose by 31,000; construction added 24,000, matching highest since February; retailers boosted staff by 18,700; hiring in leisure and hospitality rose by 14,000
  • People working part-time for economic reasons rose by 48,000 to 4.8 million
  • Private employment rose by 221,000 (median estimate 195,000) after increasing 247,000; government payrolls increased by 7,000
  • Average workweek for all workers rose to five-month high of 34.5 hours (median estimate 34.4 hours) from 34.4 hours

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