E US Jobs Report Reduces Some Of The Gloom

Despite the many reasons to worry about the US economic outlook (the government shutdown, the unresolved trade war with China, the slowdown in the housing sector, and the consensus expectation of slower global growth ahead), the American economy created 312,000 new payroll jobs in December.  Over the past three months, job gains have averaged 254,000 per month. 

Moreover, many other labour market indicators were equally strong last month. The unemployment rate rose to 3.9% in December from 3.7% in November due to a large increase in labour force participation rate. Nonetheless, the unemployment rate is still hovering in the vicinity of its half century low level.  

The labour force participation rate rose to 63.1% in December from 62.9% in November. Job openings also hit a record high last month, while a growing number of workers are voluntarily quitting their jobs, suggesting that there is strong confidence in their ability to find new jobs.

The fact that the jobs market continued to tighten was also reflected in wages jumping up to a 3.2% y/y annual pace in December. Up to recently wage growth has been slower, but the tightening labour market seems to be finally benefitting some American workers, particularly the lowest paid workers.

While Fed Chairman Powell is reassuring the markets that he will still pay attention to underlying economic growth and inflation trends in terms of the Fed’s rate setting decisions, the latest job market data are unlikely to deter the central bank from its tightening path, especially considering that average hourly earnings growth seems to be escalating.  

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