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U.S. Payrolls Cap Best Year in Fifteen, Wages Stagnate, Labor Force Shrinks

Posted by Joseph Trevisani on Jan 9, 2015 2:55:00 PM

The U.S. economy created more jobs in 2014 than in any year since 1999 and the unemployment rate fell to a post-recession low, but stagnant wages and a falling participation rate are evidence that labor market has not returned to its pre-financial crash condition.

Non-farm payrolls added 252,000 jobs seasonally adjusted in December, reported the Labor Department on Friday, bringing the total for the year to 2.952 million, the highest total since 3.177 million in 1999. The November payroll figures were revised 32,000 higher to 353,000 and the two month revision added 50,000. These payroll numbers come from a survey of employers.

The unemployment rate, which is derived from a separate survey of households, dropped to 5.6 percent in December from 5.8 percent a month earlier. It was the best reading since June 2008. However the decline was driven by 451,000 Americans leaving the work force outstripping the 111,000 new jobs listed and is the primary reason the number of unemployed workers fell by 383,000.  The Labor Department only counts as unemployed people who have actively looked for a job in the prior month. 

Average hourly earnings unexpectedly shrank 0.2 percent on the month, the first negative reading since October 2012 and well below the 0.2 percent forecast. November's 0.4 percent increase, which had been cited by many commentators as proof that the improving labor market was finally translating into higher wages, was cut in half upon revision to 0.2 percent.  

Ove the year wages  were only 1.7 percent higher in December, less than the 2.2 percent forecast. This was just equal to the annual increase in the consumer price index in November and barely ahead of the Fed's preferred measure of inflation, the core PCE index, 1.4 percent in November.  For consumers whose budgets include the food and energy costs excluded in the Fed measure, there was no extra money available in 2014 to increase spending. November's 2.1 percent annual increase in wages slipped to 1.9 percent under revision.

Average hourly earnings for private-sector workers fell 5 cents to $24.57 in December. The average workweek was unchanged at 34.6 hours in December.

The labor force participation rate fell 0.2 percent to 62.7 percent matching the lowest rate of the past 35 years.

The underemployment or U-6 rate, that counts as out of work those who are employed part time and want full-time work and those who have looked for a job in the past year, fell to 11.2 percent from 11.4 percent in November.

The manufacturing sector added 17,000 positons in December down from November’s revised 29,000 jump. 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

nfp jan 9

u3 jan 9

labor force jan 9

 

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