U.S. payroll and wage growth missed expectations in December, rounding off what one economist called a “year of consolidation” amid a tight labor market.
The Labor Department reported Friday that employers added 145,000 jobs last month, well below November’s 256,000 gain. The unemployment rate held steady at 3.5%.
For the year, the economy created 2.1 million jobs, down from 2.7 million in 2018. Growth averaged 176,000 a month, the slowest year for job creation since 2011, three years after the start of the financial crisis.
Economists had expected job growth of 160,000 in December. But Michael Pearce, senior U.S. economist at Capital Economics, was not flustered by the numbers, pointing out that November job growth was inflated by 50,000 striking General Motors employees returning to work.
“Some slowdown in the pace of job gains in December was inevitable,” he said in a client note, adding, “we expect solid gains in payrolls to extend through 2020.”
“I think 2019 was a year of consolidation,” Gregory Daco, chief U.S. economist at Oxford Economics, told The New York Times. “We had relatively strong and steady job growth over the year despite a number of headwinds including a trade war with China, weaker global activity and heightened policy uncertainty.”
The weak spots in the December report included the struggling manufacturing sector, which lost 12,000 positions. “Manufacturers, hurt by the U.S. trade war with China, have cut back on hiring,” MarketWatch said, also noting that “Energy producers coping with lower prices have barely increased employment. And brick-and-mortar retailers facing an onslaught of online competition continue to shed jobs.”
Average hourly pay rose slightly in December to $28.32, but the increase over the past year slipped to 2.9% from 3.1% — the first time there has been a gain below 3% on a year-over-year basis since July 2018. “It is astonishing that a 10-year expansion and a 50-year low 3.5% unemployment rate is not generating more wage pressure,” said chief economist Chris Low of FHH Financial.
“It’s easier to get a job than a raise in this economy,” said Diane Swonk, chief economist at Grant Thornton.