TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Slower US job growth expected in December; annual wages increase seen below 4 percent
Change Size
People display merchandise for pedestrians around Times Square, in New York, US, on Dec. 25, 2023. (Reuters/Eduardo Munoz)
U
S job growth likely moderated in December, while the increase in annual wages probably slowed to below 4 percent for the first time in 2-1/2 years, potentially drawing the Federal Reserve a step closer to start cutting interest rates.
The closely watched employment report from the Labor Department on Friday is also expected to show the unemployment rate edging up to 3.8 percent last month from 3.7 percent in November. Easing labor market conditions would add to data last month showing inflation ebbing significantly in November and could cement financial market expectations for a rate cut in March.
The report would also indicate that the economy avoided a recession last year and would likely continue to grow through 2024 as labor market resilience supports consumer spending.
"Right now, employers are hiring to keep the doors open, rather than to expand, but they're also not letting workers go," said Elizabeth Crofoot, a senior economist at Lightcast in Washington. "That's close to the 'Goldilocks' job market that the Fed has been trying to achieve."
Nonfarm payrolls likely increased by 170,000 jobs last month after rising 199,000 in November, according to a Reuters survey of economists. Baring any revisions to October and November's payrolls counts, this would mean the economy added roughly 2.722 million jobs in 2023, a sharp step-down from the 4.793 million positions created in 2022.
That reflects cooling demand for both labor and in the economy following 525 basis points worth of rate hikes from the US central bank since March 2022.
Roughly 100,000 jobs per month are needed to keep up with growth in the working age population.
Unseasonably mild weather likely boosted hiring at construction sites last month, while employment in the motion picture and sound recording industries is expected to rise further as disruptions from the since ended strikes fade.
Retail employment is a wild card amid conflicting signals on the holiday shopping season.
DANGER LURKING?
But danger could be lurking beneath the seemingly resilient labor market. Job growth in recent months has been largely concentrated in less than a handful of sectors, including leisure and hospitality as well as health care.
Government hiring as state and local governments try to bring education staffing back to pre-pandemic levels has also been driving employment gains.
Government payrolls growth has averaged 63,800 per month since July. Some economists said this indicated that the labor market was not as strong as the numbers suggested. Nonetheless, most do not expect a recession this year, but lackluster growth.
"The rest of the industries have not been hiring people very much at all," said Sung Won Sohn, finance and economics professor at Loyola Marymount University in Los Angeles. "We are going to have a 'soft landing' but that hides the pain."
Goldman Sachs economist Manuel Abecasis was, however, less concerned, noting that the three industries that have dominated hiring accounted for 40 percent of employment.
"The industries accounting for 70 percent of total employment have continued to add jobs on net," said Abecasis. "Looking ahead, we expect total labor demand to continue to ease gradually but the breadth of hiring to widen somewhat."
Financial markets are betting the Fed will begin cutting rates as early as March. Those expectations could get more mileage, with average hourly earnings expected to increase 0.3 percent in December after rising 0.4 percent in the prior month.
That would lower the year-on-year increase in wages to 3.9 percent, the smallest since June 2021, from 4.0 percent in November.
The central bank held its policy rate steady in the current 5.25 percent-5.50 percent range last month and policymakers signaled in new economic projections that the historic monetary policy tightening engineered over the last two years is at an end and lower borrowing costs are coming in 2024.
With December's employment report, the government will incorporate annual revisions to the seasonally adjusted household survey data, from the which the unemployment rate is derived, for the past five years.
The revisions typically have little impact on the jobless rate or the labor force participation rate.
There has been an influx of people into the labor force, some of it tied to a rise in immigration. The expanding labor pool is curbing wage growth and lifting the unemployment rate, which has risen from a five-decade low of 3.4 percent in April.
"We are certainly getting in the territory where, when incorporating productivity, wage growth is more consistent with the Fed's 2 percent target," said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.
