December 2017 Employment Situation

America’s economy continued adding jobs in December 2017 according to the latest data from the Bureau of Labor Statistics (BLS).  Employers hired a net 148,000 new workers as the year came to a close.  Despite the monthly increase in jobs, the unemployment rate held steady at 4.1 percent as the number of available workers also rose in the period.

Three categories of jobs led the report higher.  Health care payrolls increased 31,000 as ambulatory and hospital staffing improved.  Construction firms added 30,000 jobs with specialty trade contractors comprising 24,000 of the total.  Finally, manufacturing companies hired 25,000; largely reflecting gains in the durable goods industries. 

Even with continued employment improvements, wage growth’s trend remains tepid.  Atlas has mentioned the Philip’s Curve in several previous morning notes; this economic model suggests an inverse relationship between wages and unemployment.  In other words, as the pool of available labor declines, pay should rise since firms are competing for a limited resource.  With unemployment at the lowest level since December 2000, many have questioned the validity of the curve since wages have been reluctant to rise.  While the monthly tally did rise 0.3 percent (after rising 0.2 percent in November), the year-over-year trend remains low relative to other periods of economic expansion and jobs creation.  Versus a year ago, the average hourly wage is up 2.5 percent which is down from 2.8 percent for the 12-month lookback ending in December 2016.  For more context, this measure of wage growth was 3.6 percent in June 2007, months before the Great Recession.

Jobs growth was strong in 2017 but lagged the results of 2016.  Firms added 2.1 million net new jobs in the year, a decline of 100,000 from the prior calendar year.  However, there is some hope for an upward revision to December’s tally.  The BLS tracks the response rate each month, and at just 64.9 percent, this most recent ratio is the lowest since May 2012.  Employers may have been too busy hiring to reply to the survey before the deadline.  Of course, the revision could be up or down, but the likelihood of large change is relatively high since the number of completed surveys was so low.