U.S. economy added 312,000 jobs in December and wage growth gained steam, marking a strong finish to 2018

A worker assembles the frame of a round baler at the
New Holland plant in New Holland, Pa.
(Luke Sharrett/Bloomberg News/ Via Washington  Post)

by Danielle Paquette and Andrew Van Dam (The Washington Post): The U.S. economy added 312,000 jobs in December, smashing expectations for year-end growth, and wages rose 3.2 percent in the year since December 2017 after nearly a decade of tepid improvements, federal economists reported Friday.

The unemployment rate crept up to 3.9 percent — the highest level since July, the Labor Department’s latest numbers showed.

That shouldn’t ring alarm bells, said Joseph Brusuelas, chief economist at RSM, an international consulting firm. Some 400,000 more people began looking for work last month, signaling that higher pay could be motivating Americans who were previously on the bench to start seeking better opportunities.

“You’re bringing people back into the labor force," he said. "That’s a good thing.”

Altogether, 2018 was the best year for job creation since 2015. The economy added 2.6 million jobs, and the year closed with a slightly higher labor participation rate: 63.1 percent of Americans were working or looking for jobs in December, up from November’s 62.9 percent.

Bigger paychecks and better benefits are also inspiring people who work informally as caretakers, house fixers, website builders — freelance jobs that are often paid with cash — to seek more stable employment, said Michael Hicks, a labor economist at Ball State University in Indiana.

Companies tend to offer more appealing incentives as they struggle to fill vacancies.

“Employers are across the board complaining about keeping and retaining the workers that they want,” Hicks said. “Wage growth is a straightforward symbol of that.”

The December numbers follow a stretch of steady hiring across industries — particularly manufacturing, which had its biggest boost in about a decade. There were some exceptions, including retail and food services. And economists caution that the pace of hiring overall is expected to slow in 2019.

At this stage of the nine-year recovery, maintaining the streak that took off in 2014 is projected to become increasingly difficult. Trade tensions with China and other countries could accelerate this slowdown, since President Trump’s tariffs are raising the cost of doing business worldwide.

Those uncertainties are already playing out in the volatile stock market, but so far America’s labor market has remained robust.

Manufacturing, health care, retail and construction led December’s growth.

The Bureau of Labor Statistics also amended previous reports to show that more jobs were added — a common move after last year’s hurricanes scrambled the numbers, analysts said. November’s figure was revised up to 176,000 jobs from 155,000, while October’s gains grew to 274,000 from 237,000.

Trump celebrated the news on Twitter:

GREAT JOBS NUMBERS JUST ANNOUNCED!

— Donald J. Trump (@realDonaldTrump) January 4, 2019

Labor Secretary Alec Acosta also applauded the numbers.

“This closes a very strong 2018. Positive news was widespread: 2.6 million new jobs created in the past twelve months, America’s average wage earnings are on the rise, 8 months of unemployment below 4%, and series low unemployment rates this year for African-Americans, Asian-Americans, Hispanic-Americans, and those without a high school degree,” he said in a statement.

The latest BLS report doesn’t include the temporary job losses from the government shutdown, which began Dec. 22 and has suspended work for some 800,000 federal employees.

Last year started with an unemployment rate of 4.1 percent. The jobless rate dropped to 3.7 percent in September — the lowest since 1969.

Manufacturing experienced a major rebound, producing roughly 281,000 jobs. That’s the biggest annual upswing since the Great Recession and well above the 2017 figure (207,000).

Manufacturing combined with a surging oil and gas sector and steady growth in construction jobs to produce what looks to be the best year for blue-collar, goods-producing jobs since 2014.

There’s some question if the boom will continue, however. Crude prices have fallen for the past three months.

“We’re seeing two different economic realities right now,” said Martha Gimbel, research director for the Hiring Lab at Indeed, an employment website. “One is the stock market, which is going through something, and the other is the labor market, which has been chugging along.”

The typical worker’s year-over-year earnings grew by 3.1 percent in October — the biggest jump since 2009. Wage growth held to that pace in November, according to the Bureau of Labor Statistics. But inflation ticked up in 2018, offsetting some of that bump.

If monthly job gains start shrinking in 2019, people shouldn’t panic, Gimbel said. Since 2010, 1 in 10 months have seen less than 100,000 new jobs added.

The economy needs to add 80,000 jobs a month just to maintain current staffing levels.

Trade tensions, however, will take a bite out of this year’s progress, he said, if Trump and Chinese leader Xi Jinping don’t reach a deal to end their dispute by their self-imposed March deadline.

“You’re going to see a slowdown in business investment and hiring, especially by large firms,” said Brusuelas, the RSM economist. “The large multinational firms derive roughly half of their revenues from the global sector.”

Apple pointed to the trade war Wednesday when it lowered its quarterly sales estimates for the first time in 15 years. Chief executive Tim Cook blamed tariffs and China’s slowing economy.

[Graphics: How healthy is Trump’s economy?]

Job growth has also slowed considerably in the lower-paying service sector in the first two years of the Trump presidency. The enormous retail trade industry, in particular, has suffered. Growth in federal, state and local government jobs, which had been picking up pace, tapered off.

Overall, however, 2018 was a year that shifted more power to workers, said Josh Wright, chief economist at iCIMS, a hiring software firm.

As competition for employees intensified, companies expanded their search for hires. Workers who have struggled with disproportionately high joblessness found more opportunities.

Black Americans started the year with an unemployment rate of 7.7 percent; by November, that figure had dropped to 5.9 percent. The jobless rate for Hispanics fell from 5 percent to 4.5 percent.

“Employers were stretching to meet new people and invest in people,” Wright said. “There’s a lot to cheer for.”
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Danielle Paquette is a reporter focusing on national labor issues & Andrew Van Dam covers data and economics at the The Washington Post which provided this article to the ARRA News Service.

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