Payrolls were up 292,000 in December and the unemployment rate held steady at a low rate of 5 percent in another in a series of increasingly solid reports on conditions in the US labor market. Upward revisions for the prior two months added 50,000 jobs, leading to an average of 284,000 jobs per month in the last quarter of 2015. In another welcome show of strength, the labor force expanded in December, leading the participation rate to tick up slightly.
December's data reveals that US employers added a net 2.7 million jobs in 2015 while the unemployment rate fell from 5.6 percent last December to 5 percent last month. While the level of payroll gains did not surpass 2014's addition of 3.1 million, it was otherwise the strongest year of job growth since 1999.
Simply put, for all the turmoil out there in the rest of the world, the US labor market tightened up significantly in 2015. Based on some important indicators I discuss below, we are not yet at full employment. But we're headed there at a solid clip, and that pace accelerated in recent months.
This last point is observed in my patented monthly jobs smoother, showing average monthly job gains over periods of 3, 6, and 12 months. Over the past 6-12 months, payroll grew by about 220K-230K per month; over the past three months, as noted, that pace quickened to 284K per month.
Source: BLS, my calculations.
The industry story was largely positive in December, as 64 percent of private industries added jobs, though part of this could be a function of the unusually warm weather. For example, construction employment was strong, which may reflect unseasonable warmth, although the sector has been adding jobs in recent months.
The retail sales results for December may pose an interesting challenge, though more research is needed. Retail trade employment was essentially unchanged last month, up only 4,300. But transportation and warehousing added over 20,000 jobs in each of the last two months. Could these data be emblematic of the ongoing shift in holiday buying from "brick and mortar" stores to the internet? It will take a lot more digging to see if that's the case, but I wouldn't be surprised if this shift turns out to be real.
Manufacturing employment, however, remains a dark spot, due in part to the strong dollar, as discussed below. Factories added only 8,000 jobs in December, and only 30,000 for the whole of 2015, compared with 215,000 in 2014.
As noted, the job market tightened considerably in 2015, but a variety of critical indicators suggest we're not yet at full employment:
- The underemployment rate, called U-6 in this report, was unchanged at 9.9 percent last month. While the Federal Reserve has focused more on the official rate, which, at 5 percent is about at the level they consider consistent with full employment, I calculate that the full employment rate for U-6 is closer to 8.5 percent. U-6 continues to be elevated due to 6 million part-timers who would rather be full time workers. This measure of slack fell by 760,000 in 2015, but it is still too high.
Labor force participation: As noted, this rate ticked up a tenth to 62.6 percent, but it remains somewhat depressed. While some of the drop in participation is due to retirement from the aging workforce, my estimate is that full employment still has the potential to pull in enough potential workers from the sidelines to push the rate up by around 1.5 percentage points. Wage growth: It is finally picking up, and thus finally reflecting a tighter job market with some competition among employers for workers. Hourly pay grew 2.5 percent, before inflation, last year, compared to 1.8 percent in 2014. But it is essential for policy makers not to conflate any acceleration in wage growth with inflationary acceleration in wage growth. In fact, inflation, even leaving oil out of the picture, has been low and steady. Wage competition is a good thing, representing a more favorable alignment of labor supply and demand than workers have enjoyed in years. Let it proceed!To what extent is the recent stock market turmoil, here and in China, in these jobs data? Only about 5 percent of our exports go to China, so, unlike countries like Brazil and some African nations that export extensive commodities to China, we're not likely to feel a slowing China through export channels.
Imports, however, are another story. Around 20 percent of our goods' imports are from China and we already run large trade imbalances with them of around 1.5 percent of GDP, more then $300 billion/year. As the yuan depreciates in value relative to the dollar, this could exacerbate that gap and amplify the unfavorable manufacturing results cited above.
This trade channel has gotten less attention than the finance channel in recent days, as our own stock market has sold off partly in reaction to China's market woes. Global capital flows have, of course, been portentous in recent years, and no one should underestimate their potential impact, as once they go south, we too often find out that our financial markets are a lot more inter-connected than we thought. But so far, we see the impact of the strong dollar in the jobs and growth numbers more than we see financial turmoil spilling over from securities' markets.
In sum, 2015 was a good year for job growth. By the end of the year, the tightening job market finally started showing signs of generating some wage pressures. But we've got a ways to go before the economy's growth is broadly shared. For that, we need to get to and stay at full employment. We're not there yet, but were getting closer every month. It is thus essential to accommodate these developments, especially though complementary monetary policy. Unless inflation starts to behave in a much more threatening manner -- a probability I believe to be low-when it comes to the job-market expansion, love it and leave it alone!
This post originally appeared at Jared Bernstein's On The Economy blog.
Our 2024 Coverage Needs You
It's Another Trump-Biden Showdown — And We Need Your Help
The Future Of Democracy Is At Stake
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
The 2024 election is heating up, and women's rights, health care, voting rights, and the very future of democracy are all at stake. Donald Trump will face Joe Biden in the most consequential vote of our time. And HuffPost will be there, covering every twist and turn. America's future hangs in the balance. Would you consider contributing to support our journalism and keep it free for all during this critical season?
HuffPost believes news should be accessible to everyone, regardless of their ability to pay for it. We rely on readers like you to help fund our work. Any contribution you can make — even as little as $2 — goes directly toward supporting the impactful journalism that we will continue to produce this year. Thank you for being part of our story.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
It's official: Donald Trump will face Joe Biden this fall in the presidential election. As we face the most consequential presidential election of our time, HuffPost is committed to bringing you up-to-date, accurate news about the 2024 race. While other outlets have retreated behind paywalls, you can trust our news will stay free.
But we can't do it without your help. Reader funding is one of the key ways we support our newsroom. Would you consider making a donation to help fund our news during this critical time? Your contributions are vital to supporting a free press.
Contribute as little as $2 to keep our journalism free and accessible to all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circumstances have changed since you last contributed, we hope you'll consider contributing to HuffPost once more.
Support HuffPostAlready contributed? Log in to hide these messages.