US Payrolls Rise More Than Expected

Payroll growth surged in December, capping the second-best year for American workers since 1999 and further evidence of a resilient job market that prompted the Federal Reserve to raise interest rates.

The 292,000 gain exceeded the highest forecast in a Bloomberg survey and followed a 252,000 increase in November that was stronger than previously estimated, a Labor Department report showed Friday. The median forecast in a Bloomberg survey called for a 200,000 advance. The jobless rate held at 5 percent, and wage growth rose less than forecast from a year earlier.

Such job-market durability indicates employers were sanguine about the economy’s prospects just before the recent rout in global financial markets. Fed policy makers are counting on tighter labor conditions to lead to broader increases in worker pay and inflation.

“Job growth is solid,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “The labor market will remain supportive of consumer spending. We ought to see a broader pickup in wage growth this year.”

The December job gains, which were probably helped by mild winter weather across much of the country, were led by temporary-help services, health care, transportation and construction.

Labor Department revisions to prior reports added a total of 50,000 jobs to payrolls in the previous two months. For all of 2015, payrolls climbed by 2.65 million after 3.1 million in 2014 for the best back-to-back years for hiring since 1998-99.

Economists’ Forecasts

December payroll estimates of 92 economists in the Bloomberg survey ranged from gains of 135,000 to 250,000. November was initially reported as a 211,000 increase. The unemployment rate, which is derived from a separate survey of households, matched the median forecast.

With the latest jobs report, the Bureau of Labor Statistics also issued revisions for data from the survey of households dating back to 2011. Payroll figures from the survey of employers will be revised when the January data is released Feb.
5. There were no revisions to the rates in any month last year, when unemployment averaged 5.3 percent.

While employers continue to aggressively add to headcounts, worker pay has yet to show a sustainable pickup. Average hourly earnings were unchanged from the prior month. They increased 2.5 percent over the 12 months ended in December. The median forecast called for a 2.7 percent year-over-year gain.

The advance, which was the biggest since October, was primarily due to an easy comparison with December 2014, when earnings fell 0.2 percent from the previous month. This so-called base effect will probably result in some payback with the January employment report when earnings come up against a strong January 2015 comparison.

Unchanged Workweek

The average work week for all workers held in December at 34.5 hours.

Another caveat about the wage and hours results: The Bureau of Labor Statistics found a processing error in the data from March 2006 through February 2009 and will issue corrected figures on Feb. 5.

The participation rate, which shows the share of working-age people in the labor force, increased to 62.6 percent from
62.5 percent.

Employment over the final three months of 2015 increased 284,000 on average, the most since January 2015.
Hiring gains last month were broad, with construction adding 45,000 jobs, health-care providers taking on 52,600 and temporary help services boosting headcounts by 34,400. Factories even added the most jobs — 8,000 — in five months.

Federal Reserve

Minutes of the Fed’s December meeting, when policy makers boosted their target rate for federal funds, showed participants acknowledged the improvement in labor market conditions. Many judged it as “substantial.”

“Members agreed that a range of recent labor market indicators, including ongoing job gains and declining unemployment, showed further improvement and confirmed that underutilization of labor resources had diminished appreciably since early this year,” according to the minutes, released on Wednesday. At the same time, Fed officials said there was room for slack to be absorbed and signaled further hikes in interest rates would occur gradually.

On Thursday, the Standard & Poor’s 500 Index capped its worst-ever four-day start to a year as turmoil in China spread around the world. Selling in global equities began in China, where shares fell 7 percent after the central bank weakened the yuan an eighth day. Crude settled at a 12-year low, and copper dipped below $2 for the first time since 2009.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell