US jobs undershoot but earnings rise

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The monthly US employment figures were released on Friday, with risk markets and pundits hanging on all the numbers.

The headline number was well below what the market expected, at only 156,000 jobs created for December, well below average growth of 180,000 for 2016, but the unemployment rate remained steady at 4.7%:


source: tradingeconomics.com

Monthly growth just under 200,000 has been steady since 2010:

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source: tradingeconomics.com

More from Calculated Risk, where the reason the market digested the print well – US stocks made a new high and the USD was bid against all the major currencies – was due to a big increase in average hourly earnings:

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka “Establishment”) monthly employment report..

The graph shows the nominal year-over-year change in “Average Hourly Earnings” for all private employees. Nominal wage growth was at 2.9% YoY in December.

Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early ’90s, the participation rate moved more sideways, with a downward drift starting around ’00 – and with ups and downs related to the business cycle.

The 25 to 54 participation rate increased in December to 81.5%, and the 25 to 54 employment population ratio was unchanged at 78.2%.

The participation rate has been trending down for this group since the late ’90s, however, with more younger workers (and fewer older workers), the participation rate might move up some more.

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Long term unemployed seem to be doing a lot better, now down to the lowest level since July 2008:

The takeaway here is a pretty solid jobs market, with increasing wages that allow the Federal Reserve to keep tightening rates from their decade lows.

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The question is what sort of reaction will the Trump fiscal spending – which will be huuge, I guarantee it – versus the epic cuts coming in Obamacare and other social services that will have a big effect on the dwindling American middle class.