An Uninspiring December Jobs Report
This morning the Bureau of Labor Statistics reported that 148,000 jobs were added in the U.S. in the month of December, well below the 190,000 expected and in contrast with the mainly upbeat news that has characterized other recent economic data releases.
Headline unemployment, U3, remained unchanged at 4.1 percent. The broader measure of labor underutilization, U6, ticked up one-tenth to 8.1 percent.
Job gains were spread across sectors, but not particularly strong in any one. Manufacturing continued to add jobs, as did construction and all of the various service industries. Retail, however, experienced a seasonally adjusted drop of 20,000. The average workweek was unchanged and hourly earnings continued on their 2.5 percent growth path.
Figures form the previous two months were revised down 9,000 jobs, not a substantial adjustment. The December report also contains updates to the year’s seasonal adjustment factors, which were also minor.
The month’s rather uninspiring report does not provide cause for a downward revision in your economic outlook. It appears that the Tax Cut and Jobs Act will take a lot of downside risk out of the outlook for 2018. Bringing corporate tax rates in line with other industrial economies is a good thing in the long run, and it is likely to spark some additional capital investment. On the personal side, the net consequences are less clear-cut and heavily dependent on people’s state tax status.
Big picture, we have had a really good run of recent data, which was part of the reason for expecting a new jobs number in the neighborhood of 190,000. This report dampens hopes of unexpected strength and takes us back to our previous, “not so bad” outlook. For 2018 that likely translates to three rate hikes from the Fed and about 2.5 percent GDP growth, possibly a few tenths higher if the tax cut inspires additional corporate and personal spending.
About the Author
Tom Cunningham holds a Ph.D. in economics from Columbia University and was senior economist with the Federal Reserve Bank of Atlanta from 1985 to 2015. Mr. Cunningham serves as a consultant to MST in the creation and ongoing development of the MST Virtual Economist and is the MST Advisory economics specialist.
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