Hiring Cools, Unemployment Rate Stays at 4.1%

Hiring cooled though employment levels are very high and there's also a hint of wage inflation in December's employment report. Nonfarm payrolls rose 148,000 which is lower than expected but still favorable and enough to absorb new entrants into the jobs market. Revisions are slightly negative with November now sharply higher, now at 252,000, but October sharply lower, to 211,000 for a net 9,000 decline. The number of unemployed actively looking for work rose slightly to 5.308 million with the unemployment rate remaining at a 17-low of 4.1 percent. The pool of available workers, which includes those not actively working but nevertheless wanting a job, held little changed at 11.884 million. The labor participation rate is also unchanged, at 62.7 percent. Wage data show a little pressure as average hourly earnings rose a noticeable 0.3 percent on the month though November gets a 1 tenth downgrade to only a 0.1 percent gain. Year-on-year, this reading is moving in the right direction though very slowly, up 1 tenth to 2.5 percent. The payroll breakdown shows two more outstanding months for construction, up 30,000, and manufacturing, up 25,000, in confirmation that housing and the factory sector accelerated into year end. Other industries are more subdued with retail falling 20,000 in results that will raise talk of brick-and-mortar decline while professional and business services rose a subdued 19,000 with the temporary help subcomponent up only 7,000. The average workweek for all private-sector employees came in unchanged at 34.5 hours. The fundamental strength of this report contrasts a bit with the more moderate level of headline payroll growth and does raise the question, one that the Federal Reserve has been repeatedly asking in its Beige Book, whether scarcity of available labor, particularly skilled labor, is holding back business expansion -- that employers simply can't find the people they need.

Recent History Of This Indicator Nonfarm payrolls rose a stronger-than-expected 228,000 in November led by an outsized 31,000 increase for manufacturing and also including strong gains for construction and professional services. The average workweek rose 1 tenth to 34.5 hours while the unemployment rate held unchanged at a 17-year low of 4.1 percent, both of which point to the risk of possible capacity constraints in the labor market. Wage inflation, though subdued, did show slight pressure with a 0.2 percent monthly gain in average hourly earnings and 1 tenth increase in the year-on-year rate to 2.5 percent. Another month of strength is the call for December where the consensus for nonfarm payrolls is 191,000 with the unemployment rate seen unchanged at 4.1 percent. Private payrolls are expected to rise 185,000; manufacturing payrolls are pegged at a 15,000 gain; average hourly earnings are seen rising 0.3 percent for a year-on-year 2.5 percent; the consensus for December's workweek is 34.5 hours and 62.7 percent for the labor participation rate, both of which would be unchanged.