U.S. Job Market has Largest Drop in Household Employment Since April 2020 in December

U.S. Nonfarm payrolls rose 216,000 in December following downward revisions to the prior two months the Bureau of Labor Statistics showed Friday. The unemployment rate held at 3.7% while the workforce shrank. Average hourly earnings rose 0.4% from a month earlier. The surprisingly high headline NFP number however leaves us skeptical given revisions and the fact the latest revisions show the U.S. economy added just 44,000 private-sector jobs in October, showing the effects of multiple hits causing the economy to lose steam. The three-month average for private sector hiring was 115,000 in December, matching the lowest level since the economy reopened in 2020. The data also indicated a decline in temporary-help employment to the lowest since May 2021.

December was the largest drop in household employment since April 2020, a spike in the duration of unemployment spells. Meaning it’s taking longer for unemployed Americans to find work. Of concern was a drop in labor participation, greater number of temp workers unable to find jobs and more people taking part-time work for economic reasons amid a decline in working hours.

Working

The participation rate, the share of the population that is working or looking for work, fell by 0.3 percentage point to 62.5%, the largest monthly drop in nearly three years. The decrease was concentrated among younger and older workers. For those ages 25-54, participation eased 0.1 point.

Non-Farm Payrolls were revised lower 11 out of 12 months in 2023

Non-Farm Payrolls were revised lower for 11 out of 12 months in 2023. via @HedgeyeDJ

We have the unaffordability of higher borrowing costs following the Federal Reserve’s rate hiking spree, persistent inflation and war theatres in the Middle East and Ukraine. The report could lead Fed officials to quicken their lowering pause. Next week’s inflation will hint further there.

The rule by former Federal Reserve economist Claudia Sahm posits the start of a recession when the three-month moving average of the unemployment rate rises by a half-percentage point or more relative to its low during the previous 12 months. The low was 3.4% and October was the highest in 2023 so far, following two readings at 3.8% in August and September. A rate above the 3.9% level that would trigger the Sahm Rule.

The report was stronger than the ADP Employment Report for December which showed private payrolls increased 1643,000 last month. The report is released two days ahead of the BLS employment report.

December 2023 US Employment Report

US Jobs Report

December 2023 US Employment Report and Expectations

Highlights

Employment

  • Change In Nonfarm Payrolls Dec: 216K (est 175K; prev 199K)
  • Unemployment Rate Dec: 3.7% (est 3.8%; prev 3.7%)
  • Labour Force Participation Rate Dec: 62.5% vs 62.8% prior
  • Prior two-month net revision Dec: -71K vs -35K prior
United States Non-Farm Payrolls

Total Job Gains for 2023

The total job gains for 2023 was 2.7 million, the smallest annual gain since 2019 when excluding the pandemic year of 2020. It corresponds to an average monthly gain of 225K.

  • The government sector added an average of 56K jobs per month in 2023
  • Health care added 55K.
  • Leisure and hospitality added 39K jobs on average, less than an average of 88K in 2022, but employment in the sector is still 163K below its pre-pandemic February 2020 levels

Unemployment

The jobless rate was 3.7% in December the Labor Department reported Friday. The unemployment rate is higher than the pre-pandemic rate of 3.5%, which was a 50-year low. (This was bettered in Jan at 3.4%) The job market is still tight, with the national unemployment rate hovering near half-century lows but this is an 18-month high. The unemployment rate and number of unemployed persons prior to the coronavirus (COVID-19) pandemic was 3.5 percent and 5.7 million, respectively, in February 2020).

United States Unemployment Rate

The number of employed persons in The United States decreased to 161,183,000 in December of 2023 from 161,866,000 in November of 2023. Employed Persons in the United States averaged 106,962,860 from 1948 until 2023, reaching an all-time high of 161,866,000 in November of 2023 and a record low of 571,720,000 in June of 1949.

  • Change In Private Payrolls Dec: 164K (est 130K; prev 150K)
  • Change In Manufacturing Payrolls Dec: 6K (est 5K; prev 28K)
  • Household survey Nov: +747K vs -348K prior
  • Underemployment Rate U6 Dec: 7.1% (prev 7.0%)
  • Household survey Dec -683K vs +747K prior
  • Birth-death adjustment Dec -52K vs +4K prior
  • In November, the number of long-term unemployed (those jobless for 27 weeks or more) edged down to 1.2 million. These individuals accounted for 18.3 percent of all unemployed persons.

Earnings

  • Average Hourly Earnings (M/M) Dec: 0.4% (est 0.3%; prev 0.4%)
  • Avg Hourly Earnings (Y/Y) Dec: 4.1% (est 3.9%; prev 4.0%)
  • Avg Weekly Hours All Employees Dec: 34.3% (est 34.3; prev 34.4)

Other Employment Reports for December (Via ScotiaBank)

  • Consumers indicated that jobs were more plentiful in December. The measure within consumer confidence increased by over two points.
  • The NFIB small business hiring plans index slipped in December while the measure of jobs hard to fill was steady.
  • Initial jobless claims moved a little lower between the November and December nonfarm reference periods.
  • JOLTS job openings slipped in November but this is lagging data.
  • ADP private payrolls posted a 164k rise. Its soft track record makes it of little use as a nonfarm guide.
  • Challenger job cuts softened to 34.8k in December from 45.5k the prior month and were the lowest number since July although it is seasonally unadjusted data.
  • ISM measures are of little use. That’s because while we know that ISM-manufacturing’s employment subindex improved, it’s a small share of hiring and we don’t get the ISM-services employment figure until after payrolls this morning.
  • Categories like retail as well as leisure and hospitality will be particularly worth monitoring to see how hiring stacked up to seasonal norms.

Participation

The Labor Force Participation Rate in the United States decreased by 0.3 percentage points to 62.50 percent in December, marking the biggest drop since January 2021. It is the lowest rate in 10 months as 845,000 people left the labor force.

Market Reaction (Updated at Stock market open)

  • The stock market bounced after registering losses this week.
  • The S&P 500 is up 0.5% and the Invesco S&P 500 Equal Weight ETF (RSP) is up 0.6%.
  • All 11 S&P 500 sectors trade up with gains ranging from 0.1% to 1.0%.
  • Market breadth is positive, but modestly. Advancers have a 4-to-3 lead over decliners at the NYSE and an 11-to-10 lead at the Nasdaq.

Treasury yields surged higher in response but came back.

  • The 10-yr note yield, at 4.04% before the data, jumped to 4.09% in response, but pulled back to 4.05%. The 2-yr note yield, at 4.40% right before 8:30 ET, jumped to 4.48% in response, but pulled back to 4.44%.
  • 2-yr: +8 bps to 4.45%
  • 3-yr: +10 bps to 4.23%
  • 5-yr: +8 bps to 4.05%
  • 10-yr: +8 bps to 4.07%
  • 30-yr: +7 bps to 4.21%

WSJ Fed Watcher Nick Timiraos on the jobs report:

Where the Jobs Were:

Largest gains (prior month) occurring in:

  • government (52K),
  • leisure and hospitality (40K),
  • health care (38K),
  • social assistance (21K),
  • construction (17K),
  • Employment showed little change in other major industries, including mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; information; financial activities; and other services.

Largest losses (prior month) occurring in:

  • Employment in transportation and warehousing lost jobs (-23K).

 


Household Survey Data  

The unemployment rate held at 3.7 percent in December, and the number of unemployed persons was essentially unchanged at 6.3 million. These measures are higher than a year earlier, when the jobless rate was 3.5 percent and the number of unemployed persons was 5.7 million.

Among the major worker groups, the unemployment rates for adult men (3.5 percent), adult women (3.3 percent), teenagers (11.9 percent), Whites (3.5 percent), Blacks (5.2 percent), Asians (3.1 percent),and Hispanics (5.0 percent) showed little change in December.

The number of long-term unemployed (those jobless for 27 weeks or more), at 1.2 million, was little changed in December and over the year. The long-term unemployed accounted for 19.7 percent of all unemployed persons in December.

The labor force participation rate, at 62.5 percent, and the employment-population ratio, at 60.1 percent, both decreased by 0.3 percentage point in December. These measures showed little or no change over the year.

The number of persons employed part time for economic reasons, at 4.2 million, changed little in December but was up by 333,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

The number of persons not in the labor force who currently want a job edged up to 5.7 million in December and was up by 514,000 over the year. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.

Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force changed little at 1.6 million in December but was up by 306,000 over the year. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, at 346,000, was little changed in December and over the year.


Establishment Survey Data

Total nonfarm payroll employment increased by 216,000 in December. Employment continued to trend up in government, health care, social assistance, and construction, while transportation and warehousing lost jobs. Payroll employment rose by 2.7 million in 2023 (an average monthly gain of 225,000), less than the increase of 4.8 million in 2022 (an average monthly gain of 399,000)

Private Jobs

  • In December, health care added 38,000 jobs. Employment continued to trend up in ambulatory health care services (+19,000) and hospitals (+15,000). Job growth in health care averaged 55,000 per month in 2023, compared with the 2022 average monthly gain of 46,000.
  • Employment in social assistance rose by 21,000 in December, mostly in individual and family services (+17,000). Social assistance employment rose by an average of 22,000 per month in 2023, little different than the average increase of 19,000 per month in 2022.
  • In December, construction employment continued to trend up (+17,000). Employment in nonresidential building construction increased by 8,000. Construction added an average of 16,000 jobs per month in 2023, little different than the 2022 average monthly gain of 22,000.
  • Employment in transportation and warehousing declined by 23,000 in December. Couriers and messengers lost 32,000 jobs, while air transportation added 4,000 jobs. Since reaching a peak in October 2022, employment in transportation and warehousing has decreased by 100,000.
  • Employment in leisure and hospitality changed little in December (+40,000). The industry added an average of 39,000 jobs per month in 2023, less than half the average gain of 88,000 jobs per month in Employment in the industry is below its pre-pandemic February 2020 level by 163,000, or 1.0 percent.
  • Retail trade employment changed little in December (+17,000). Over the month, employment increased in warehouse clubs, supercenters, and other general merchandise retailers (+14,000); building material and garden equipment and supplies dealers (+8,000); and automotive parts, accessories, and tire retailers (+4,000). These job gains were partially offset by a job loss in department stores (-13,000). Retail trade employment has shown little change, on net, since recovering in early 2022 from pandemic-related losses.
  • In December, employment in professional and business services changed little (+13,000). Employment in professional, scientific, and technical services continued to trend up (+25,000); this industry added an average of 22,000 jobs per month in 2023, about half the average monthly gain of 41,000 in 2022.
  • In December, employment in temporary help services continued its downward trend (-33,000) and has fallen by 346,000 since reaching a peak in March 2022.
  • Overall, employment in professional and business services changed little in 2023.
  • Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; information; financial activities; and other services

Government Jobs 

Government employment increased by 52,000 in December. Employment continued to trend up in local government (+37,000) and federal government (+7,000). Government added an average of 56,000 jobs per month in 2023, more than double the average monthly gain of 23,000 in 2022.

United States Government Payrolls

Manufacturing Jobs

Manufacturing Payrolls in the United States increased by 6,000 in December of 2023. Manufacturing Payrolls in the United States averaged 384,000 from 1939 until 2023, reaching an all-time high of 655,000 in April of 1946 and a record low of -171,500 in September of 1945

Earnings

In December, average hourly earnings for all employees on private nonfarm payrolls rose by 15 cents, or 0.4 percent, to $34.27. Over the past 12 months, average hourly earnings have increased by 4.1 percent. In December, average hourly earnings of private-sector production and nonsupervisory employees rose by 10 cents, or 0.3 percent, to $29.42.

 Wages Monthly

Wages Yearly

 Hours

The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.3hours in December. In manufacturing, the average workweek was little changed at 39.8 hours, and overtime remained at 2.9 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down by 0.1 hour to 33.7 hours. (

The change in total nonfarm payroll employment for October was revised down by 45,000, from +150,000 to +105,000, and the change for November was revised down by 26,000, from +199,000 to +173,000. With these revisions, employment in October and November combined is 71,000 lower than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.)


The Employment Situation for January is scheduled to be released on Friday, February 2, 2024, at
8:30 a.m. (ET)


Source: AFP, Challenger, DOL, TradersCommunity Data, BLS

From The TradersCommunity News Desk