 | Non-farm payrolls increased 200,000 in December |
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| Posted Under: Data Watch • Employment |
Implications: This is the best employment report since the start of the recovery. The labor market still has a long way to go before it gets back to normal, but the pace of improvement has clearly accelerated. Private payrolls increased 212,000 in December (209,000 including revisions to prior months). Every major category of private payrolls increased in December. Perhaps even more important was an increase in the average workweek to 34.4 hours from 34.3. That might not seem like a lot, but it translates into 320,000 jobs. In other words, had employers kept the workweek unchanged, they would have needed to hire more than 500,000 workers for the month instead of just 212,000. This is an important signal of more job gains to come. In 2011, nonfarm payrolls were up an average of 137,000 per month. We anticipate an increase around 180,000 for 2012. Some pessimists say a "birth/death" model is artificially inflating payroll gains, but December's birth/death adjustment was -11,000, the first negative adjustment for any December in the last nine years. The other big headline for today is that the unemployment rate ticked down to 8.5% in December, the lowest since March 2009 and almost a full percentage point lower than a year ago. The December drop was due to a solid 176,000 increase in civilian employment. Although the November jobless rate was revised to 8.7% from 8.6%, that change is deceiving. Unrounded, November's jobless rate was revised to 8.65% from 8.64%, so there was no significant change. The bottom line is that hours worked in the private sector are up 2.4% in the past year, while average hourly earnings are up 2.1%. This translates into a 4.5% gain in cash earnings (excluding fringe benefits, like health insurance). We all wish it were faster, but incomes are outpacing inflation. The pessimists banking on a weak economy in 2012 ought to re-check their assumptions.
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