December Payrolls Up 292K, Unemployment Steady at 5%

The labor market is stronger than most assessments with December results well outside top-end estimates and big upward revisions underscoring the strength of prior months. Nonfarm payrolls jumped 292,000 in December which is 92,000 above the consensus and 43,000 above Econoday's high forecast. The gain importantly is led by professional & business services which is considered a leading component for future hiring and which rose 73,000 for the second outsized gain of the last three months. Construction, boosted by the nation's unseasonable weather, has also been adding workers, up 45,000 in December. Upward revisions to November and October nonfarm headlines total 50,000.

Despite the payroll gain, the unemployment rate held steady at 5.0 percent. The labor force participation rate, however, did improve, up 1 tenth to 62.6 percent. The strength in hiring did not result in a wage rise as hourly earnings came in unchanged though the year-on-year rate, boosted by an easy year-ago comparison, rose 2 tenths to 2.5 percent, a rate that, however, is lower than many expected.

This report is strong but the lack of wage punch underscores the two-track economy and the Fed's dilemma -- strong job growth but weak inflation.

Recent History Of This Indicator:
Nonfarm payrolls are expected to rise 200,000 in December in what would extend a run of very solid employment reports. Strength near the high end forecast of 249,000, or a dip to 4.9 percent for the unemployment rate, would likely seal early expectations for another rate hike at the March FOMC.