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.
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.
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.
Source: Dow Jones