US Added 223k Jobs in December as Wage Growth Softens

US Nonfarm Payrolls in December rose 223,000 rose higher than the expected 210,000 after the prior increase revised 256,000 increase in November (from 263,000). A key gauge for the Fed, average hourly earnings growth moderated to 4.6% year-over-year from 4.8% in November. Last month’s hot number was revised lower also. Average hourly earnings rose 0.3% (consensus 0.4%) after a revised 0.4% increase in November (from 0.6%). The average workweek fell to 34.3 hours in December from 34.4 hours in November.

Nonfarm private payrolls increased by 220,000 (consensus 200,000) following a revised 202,000 increase in November (from 221,000). The unemployment rate fell to 3.5% in December from a revised 3.6% in November (from 3.7%). Private payroll company ADP reported that US jobs grew 235,000 private payrolls in December (consensus 153,000).

Working

December 2022 US Employment Report

The jobless rate was 3.5% in December the Labor Department reported Friday. The unemployment rate is back at the February 2020 pre-pandemic rate of 3.5%, which was a 50-year low.

US Jobs Report

November 2022 US Employment Report and Expectations

Highlights

Employment

  • Change In Non-Farm Payrolls Dec: 223K (exp 202K, R prev 256K)
  • Unemployment Rate Dec: 3.5% (exp 3.7%, R prev 3.6%)
  • US Labour Force Participation Rate Dec: 62.3% (est 62.3; Rprev 62.2%)
  • Prior two-month net revision 28,000 lower than previously reported. The change in total nonfarm payroll employment for October was revised down by 21,000, from +284,000 to +263,000, and the change for November was revised down by 7,000, from +263,000 to +256,000.
United States Unemployment Rate

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). The number of employed persons in The United States increased to 159,244k in December 2022 from 158,527k thousand in November. 

United States Non Farm Payrolls
United States Non-Farm Payrolls
  • Change In Private Payrolls Dec: 220K (est 180K; prevR 220K)
  • Change In Manufacturing Payrolls Dec: 10K (est 10K; prevR 36K)
  • Change in Government Payrolls Dec +3K (prev +42k)
  • Household survey +717K vs -186K prior
  • U6 Underemployment Rate Dec: 6.5% (prev 6.7%)
  • Birth-death adjustment -56K
  • Long-term unemployed 1.1 mil vs (prev 1.1m, 1.2m pre-pandemic)
  • The long-term unemployed accounted for 19.5 percent of all unemployed persons.
  • The employment-population ratio 60.1% vs (prevR 59.9%, 61.2% before pandemic)

Earnings

  • Average Hourly Earnings (M/M) Dec: 0.3% (exp 0.4%, R prev 0.4%)
  • Average Hourly Earnings (Y/Y) Dec: 4.6% (exp 5.0%, R prev 4.8%)
  • Average Weekly Hours All Employees Nov: 34.3 (est 34.4; prevR 34.4)
  • Manufacturing workweek little changed at 40.1 hours.
  • Factory overtime declined 0.2 hour to 2.9 hours.

The market had expected the December report released Friday to show nonfarm payrolls rose 202k new jobs.  December continues the drop from an average of 439K in the first eight months of the year, as higher interest rates and prices started to weigh on the economy. Private payroll company ADP reported that US jobs grew just 235,000 private payrolls in December (consensus 153,000).

A severe labor shortage had driven up annual wage increases above 5% every month of this year until this month. By contrast, wage gains averaged 3.2% in the 12 months to February 2020. Wage growth rose last month. Average hourly earnings rose by 0.3% in December from a month earlier. They were up 4.6% from a year earlier.

Employers hired across industries. Companies in certain industries that are vulnerable to interest-rate increases, such as technology and real estate, have announced layoffs. Some firms have implemented hiring freezes.

The labor force participation rate, which measures the share of the population working or looking for work rose to 62.3% in December from 62.2% in November. More workers joining the labor force could help sustain job growth in the coming months. Participation is down from 63.4% in February 2020.

Total nonfarm employment has increased by around 22.0 million since hitting a trough in April 2020 and has returned to the pre-pandemic level. The number of unemployed persons rose by 48 thousand to 6.01 million in November, while the number of employed decreased by 138 thousand to 158.5 million. Since February 2020, government employment is down by 461 thousand, or 2.0 percent.

Employment in many sectors is now back to or surpassing pre-pandemic levels, including construction, retail, and educational services. Employment in leisure and hospitality has yet to recover despite rising by 67,000 jobs in December. @equitablegrowth
Private-sector employment continued to rise in December, while public-sector employment has recovered more slowly and remains below pre-pandemic levels. @equitablegrowth

Market Reaction

The report itself being good news for the economy is seen as mixed news for bond and stock markets, thinking it will hold any eventual pivot on rates by the Fed with its monetary policy. The report says still higher for longer with respect to the target range for the fed funds rate.

  • The terminal Fed funds top has moved down to 5.03% from 5.05% before the release and the odds of just 25 bps on Feb 1 are up to 66.7% from 60% pre-release.
  • Treasury yields fell sharply after the report. The 2-yr note yield, at 4.48% shortly before the release, sits at 4.40% now. The 10-yr note yield, at 3.74% a short time ago, sits at 3.69% now. 
  • The U.S. Dollar Index fell on the heels of the employment report. USD/JPY down to 133.41 after touching a session high of 134.77 shortly before the data. USD/CAD is particularly soft after Canadian jobs growth crushed expectations with 104.0K new positions compared to 8.0K expected.
  • The S&P 500 futures are up 35 points and are trading 0.9% above fair value. The Nasdaq 100 futures are up 81 points and are trading 0.7% above fair value. The Dow Jones Industrial Average futures are up 306 points and are trading 0.9% above fair value.

UPDATE: Treasury bonds soar, yields plunge on Wages Soften: 2-yr note yield down 16 basis points to 4.29% 10-yr note yield is down 14 basis points to 3.58% CBOE Volatility $VIX ▼ -1.03 (-4.59%) to 21.43 S&P 500 $SPX ▲ +70.59 (+1.85%) to 3,878.69

WSJ Fedwatcher Nick Timiraos on the jobs report:

Revisions to average hourly earnings data paint a marginally less worrisome picture for the Fed on wages than the Nov report.

The upturn in wage growth in Nov (originally reported as +0.6%) was revised (to +0.4%) The 4.6% annual wage growth in Dec was the lowest since Aug ’21

Where the Jobs Were:

Job gains were widespread. In September, 5.2 percent of employed persons teleworked because of the coronavirus pandemic, down from 6.5 percent in the prior month. In May 2020, the first month these data were collected, 35.4 percent of employed persons teleworked because of the coronavirus pandemic. These data refer to employed persons who teleworked or worked at home for pay at some point in the 4 weeks preceding the survey specifically because of the pandemic.

Largest gains occurring (prior month) in:

  • Leisure and hospitality +67,000
  • Healthcare +55,000
  • Construction +28,000
  • Social Assistance +20,000

 

Other December Employment Reports


Household Survey Data  

The unemployment rate edged down to 3.5 percent in December and has remained in a narrow range of 3.5 percent to 3.7 percent since March. The number of unemployed persons edged down to 5.7 million in December.

Among the major worker groups, the unemployment rate for Whites fell to 3.0 percent in December. The jobless rates for adult men (3.1 percent), adult women (3.2 percent), teenagers (10.4 percent), Blacks (5.7 percent), Asians (2.4 percent), and Hispanics (4.1 percent) showed little or no change over the month.

The number of long-term unemployed (those jobless for 27 weeks or more) declined by 146,000 to 1.1 million in December. This measure is down from 2.0 million a year earlier. The long-term unemployed accounted for 18.5 percent of all unemployed persons.

The employment-population ratio increased by 0.2 percentage point over the month to 60.1 percent. The labor force participation rate was little changed at 62.3 percent. Both measures have shown little net change since early 2022. These measures are each 1.0 percentage point below their values in February 2020, prior to the coronavirus (COVID-19) pandemic.

The number of persons employed part time for economic reasons, at 3.9 million, changed little in December. 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 fell by 352,000 to 5.2 million in December and is little different from its February 2020 level of 5.1 million. 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 declined by 231,000 to 1.3 million in December. 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, numbered 410,000 in December, essentially unchanged from the previous month.


Establishment Survey Data

Total nonfarm payroll employment increased by 223,000 in December. Notable job gains occurred in leisure and hospitality, health care, construction, and social assistance. Payroll employment rose by 4.5 million in 2022 (an average monthly gain of 375,000), less than the increase of 6.7 million in 2021 (an average monthly gain of 562,000)

Private Jobs

United States Nonfarm Payrolls - Private
  • Health care employment increased by 55,000 in December, with gains in ambulatory health care services (+30,000), hospitals (+16,000), and nursing and residential care facilities (+9,000). Job growth in health care averaged 49,000 per month in 2022, considerably above the 2021 average monthly gain of 9,000.
  • Employment in construction increased by 28,000 in December, as specialty trade contractors added 17,000 jobs. Construction employment increased by an average of 19,000 per month in 2022, little different than the average of 16,000 per month in 2021.
  • Social assistance added 20,000 jobs in December. Employment in individual and family services continued to trend up over the month (+10,000). Job growth in social assistance averaged 17,000 per month in 2022, compared with the 2021 average of 13,000 per month.
  • Employment in the other services industry continued to trend up in December (+14,000). Monthly job growth in other services averaged 14,000 in 2022, lower than the average of 24,000 per month in 2021. Employment in other services is below its February 2020 level by 174,000, or 2.9 percent.
  • In December, mining employment increased by 4,000, reflecting job growth in support activities for mining (+5,000). Since a recent low in February 2021, mining employment has grown by 104,000.
  • Employment in retail trade changed little in December (+9,000). Job growth in retail trade averaged 16,000 per month in 2022, less than half the average growth of 35,000 per month in 2021.
  • In December, employment in transportation and warehousing changed little (+5,000). Air transportation (+3,000) added jobs over the month, while employment continued to trend down in couriers and messengers (-4,000) and in warehousing and storage (-3,000). In 2022, average job growth in transportation and warehousing (+17,000) was about half the average job growth in 2021 (+36,000).
  • Employment in professional and business services remained little changed in December (-6,000).
  • Employment in temporary help services declined by 35,000 over the month and has fallen by 111,000 since July. Job growth in professional and business services averaged 50,000 per month in 2022, roughly half of the average of 94,000 per month in 2021.
  • Over the month, employment showed little change in other major industries, including wholesale trade, information, and financial activities

Government Jobs 

In December, government employment was essentially unchanged (+3,000). Employment in state government education declined by 24,000, reflecting strike activity among university employees.

United States Government Payrolls

Manufacturing Jobs

In December, government employment was essentially unchanged (+3,000). Employment in state government education declined by 24,000, reflecting strike activity among university employees.

United States Manufacturing Payrolls

Earnings

In December, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents, or 0.3%, to $32.82 in December of 2022, following a downwardly revised 0.4% gain in the prior month and below market forecasts of a 0.4% increase. This was the smallest growth in average hourly earnings in four months. In December, average hourly earnings of private-sector production and nonsupervisory employees rose by 6 cents, or 0.2%, to $28.07. Over the past 12 months, average hourly earnings have increased by 4.6%, the least since August of 2021 and below market estimates of a 5% advance

 Wages Monthly

United States Average Hourly Earnings MoM

Wages Yearly

United States Average Hourly Earnings YoY

The average workweek for all employees on private nonfarm payrolls declined by 0.1 hour to 34.3 hours in December. In manufacturing, the average workweek for all employees was little changed at 40.1 hours, and overtime declined by 0.2 hour to 2.9 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls decreased by 0.1 hour to 33.8 hours.

 Hours

United States Average Weekly Hours

The change in total nonfarm payroll employment for October was revised down by 21,000, from +284,000 to +263,000, and the change for November was revised down by 7,000, from +263,000 to +256,000. With these revisions, employment gains in October and November combined were 28,000 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 December is scheduled to be released on Friday, February 3, 2023, at 8:30 a.m. (ET).


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

From The TradersCommunity News Desk