U.S. Employers Slowed Pace of Hiring in December--Update

By Eric Morath and Josh Mitchell Features Dow Jones Newswires

The pace of hiring slowed last month, but the unemployment rate held at a 17-year low, suggesting it is becoming more difficult for employers to find workers in a tight labor market.

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Nonfarm payrolls rose a seasonally adjusted 148,000 in December, the Labor Department said Friday. Meanwhile, the unemployment rate remained at 4.1%, matching the lowest level since December 2000 for the third straight month. Hourly wages improved modestly during December, and rose 2.5% from a year earlier.

Economists surveyed by The Wall Street Journal had expected 180,000 new jobs and a 4.1% unemployment rate in December. Revised figures show employers added 252,000 jobs in November and 211,000 in October, for a net downward revision of 9,000.

For all of 2017, employers added 2.1 million jobs, the seventh straight year of job growth of 2 million or better. It is only the second time on record -- the other being in the 1990s -- when the economy has produced jobs at that pace for that long. Still, last year was the worst for payroll gains since 2010.

The pace of job creation in 2017 suggests the expansion may have more room to run 8 1/2 years after the most recent recession ended. And the economy could get an additional boost as new tax laws go into effect. The changes cut taxes for most households, which could stimulate consumer spending, and are intended to incentivize businesses to hire and invest.

An overly tight labor may lead to wage and price inflation and cause the Federal Reserve to become more aggressive in tightening monetary policy. That could raise the risk of tipping into a recession.

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At their last meeting, Fed officials discussed several factors, including stimulus from tax cuts, which could necessitate a steeper path of increases in their benchmark federal-funds rate, according to the minutes of their December meeting released earlier this week. The Fed raised the rate in December to a range between 1.25% and 1.5%, and penciled in three quarter-percentage point rate increases in 2018.

So far wage pressures appear to be relatively subdued. Average hourly earnings for private-sector workers increased 9 cents in December to $26.63. Hourly wage growth has failed to match the prerecession pace, despite a lower unemployment rate.

But the average workweek held at 34.5 hours for the second straight month, slightly elevated compared with earlier in 2017. Americans working more hours means many are seeing larger weekly paychecks.

Friday's report showed the employers added jobs in manufacturing, construction and health care. Employment fell in retail.

All levels of government added a combined 2,000 jobs to payrolls last month.

December marked the 87th straight month employers added to payrolls, a streak nearly twice as long as the second-best run.

This current labor-market expansion is more notable for its length than its strength. Payrolls grew by better than 2.5% annually, on average, during the economic expansions in the 1960s, 1980s and 1990s. Payroll growth has only topped 2% for the year once in the current upturn, in 2014.

The share of Americans participating in the labor force held steady at 62.7% in December. Participation has largely moved sideways the past two years, a positive sign that some Americans are being drawn in off the sidelines and helping to counter the trend of aging baby boomers retiring.

A broad measure of unemployment and underemployment that includes Americans stuck in part-time jobs or too discouraged to look for work increased in December to 8.1% from 8.0% the prior month.

Write to Eric Morath at eric.morath@wsj.com and Josh Mitchell at joshua.mitchell@wsj.com

WASHINGTON -- The pace of hiring slowed a bit in the final month of 2017, but remained robust for the year as a whole and the jobless rate held at a 17-year low, signs the broader labor market maintained plenty of momentum going into the new year.

Nonfarm payrolls rose a seasonally adjusted 148,000 in December, the Labor Department said Friday. That brought employment gains for the year to 2.1 million, the seventh straight year of increases exceeding two million. It is only the second time on record -- the other being in the 1990s -- when the economy has produced jobs at that pace for that long.

The unemployment rate remained at 4.1%, matching the lowest level since December 2000 for the third straight month, with benefits hitting a widening swath of the population. The unemployment rate for blacks fell to 6.8% in December, the lowest level since records were kept starting in 1972. Unemployment for Hispanics and Latinos was 4.9%, just above a record low. Those rates remained elevated relative to December's 3.7% unemployment rate for whites.

Hiring has now risen for 87 straight months, the longest uninterrupted period of job expansion on record. The second longest run of job expansion -- between 1986 and 1990 -- was only about half as long.

The current labor-market expansion is more notable for its length than its strength. Payrolls grew by better than 2.5% annually, on average, during the economic expansions in the 1960s, 1980s and 1990s. Payroll growth has topped 2% for the year only once in the current upturn, in 2014. It was 1.4% in 2017, the smallest annual increase since 2010.

Still the economy could get an additional boost in the months ahead as business and individual income tax cuts passed by Congress go into effect. The cuts could stimulate consumer spending and business investment. Economists surveyed by The Wall Street Journal expect the economy to add another 2 million jobs in 2018, which would be a record-setting eighth straight year of job growth at or above that pace.

"The fact that job growth hasn't tapered off faster -- that's pretty impressive," said Kate Warne, economist and investment strategist at Edward Jones. "Job growth last year was pretty much the same as in 2016, and that's our outlook for this year as well. We don't expect anything radically different."

Friday's report showed employers added jobs in manufacturing, construction and health care in December. Employment fell in retail.

In theory, wage growth should be picking up as available workers become more scarce and businesses compete for labor. But average hourly earnings rose 2.5% in December from a year earlier, a similar, modest pace as maintained since early 2015. Wage gains look a bit better on a weekly basis, because Americans are working more hours.

Modest wage growth is one factor that is expected to keep the Federal Reserve restrained as it raises short-term interest rates in the months ahead. It is projected to raise rates three times this year, the next time in March.

As the expansion rolls on, companies are reporting increasing trouble finding qualified workers. That could spur wage gains in the months ahead as employers bid to take up and retain employees.

Famous Toastery, a North Carolina chain of breakfast restaurants, wants to add two restaurants a month over the next year. The biggest threat to that goal is being able to find workers, said Chief Executive Robert Maynard.

"If we need 50 people to open a restaurant, we hire 75," he said. "We know on day one, X number of people won't show up and X number of people won't be qualified."

He said workers frequently jump to better paying jobs, sometimes even before they start working at Famous Toastery. Still, the chain is reluctant to get into bidding wars with competitors over wages. Instead it is trying to attract workers with other perks, such as no evening work and consecutive days off for managers.

The share of Americans participating in the labor force held steady at 62.7% in December. Participation has largely moved sideways the past two years, a sign that some Americans are being drawn off the sidelines of the labor market and countering the long-run trend of aging baby boomers retiring.

Christopher Davis, 36 years old, lost his job as a contractor for the city of Chicago in 2014 when he plead guilty to a gun possession charge. After he was released from jail in 2015, he landed several interviews, but had job offers pulled after background checks. Last month he landed a job as a building manager at ABM Industries, a maintenance and janitorial services firm, with help from Cara, a social services nonprofit.

Mr. Davis said he earns about $10 less an hour than he did at his old job.

"It's less, but it's a great starting spot," he said. "I'm looking to grow with the company and add more responsibility."

Labor-force participation among workers between 25- and 54-years old edged up in December to the highest rate, 81.9%, since 2010. Still, the share of those working-age adults working or seeking work is well below prerecession levels.

A broad measure of unemployment and underemployment that includes Americans stuck in part-time jobs or too discouraged to look for work increased in December to 8.1% from 8.0% the prior month.

Write to Eric Morath at eric.morath@wsj.com

(END) Dow Jones Newswires

January 05, 2018 18:35 ET (23:35 GMT)