The U.S. job market ended 2015 on an unexpectedly high note. Now the question is whether it can sustain that momentum in a new year that is already off to a rocky start.
American employers added 292,000 jobs in December, the biggest gain all year, the Bureau of Labor Statistics said Friday. The unemployment rate held steady at 5 percent as strong job prospects drew more people into the labor force to look for work. And the rest of the report was equally strong: Job growth was spread widely across industries and demographic groups. Even wages, long the weak spot in the otherwise strong job-market recovery, have shown signs of faster growth in recent months.
But for all the good news, the outlook for the coming months is uncertain. The new year has begun with a plunging stock market in China, which has roiled global financial markets and intensified fears of a worldwide economic slowdown. Even before the market slump, U.S. manufacturers were feeling the pinch: Data released Monday showed the factory sector contracting sharply at the end of 2015. And the U.S. economy will need to weather the storm with less help from the Federal Reserve, which raised interest rates in December and is likely to do so again later this year.
Still, December’s strong numbers showed that the job market has substantial momentum. Employers added 2.7 million non-agricultural jobs in 2015, down a bit from the 3.2 million added in 2014 but still strong. The economy has added jobs for 63 consecutive months, the longest streak on record; the U.S. has added 13.6 million jobs since the labor market bottomed out in early 2010, and 4.9 million since the recession began in December 2007.
Moreover, there may still be room for further improvement. The unemployment rate, at 5 percent, is at or near what many economists consider the economy’s natural long-term floor. (Any lower, this theory goes, and inflation will start to pick up.) But the labor force grew by 466,000 in December as people came off the sidelines to accept jobs or look for work. For years, economists have been debating whether the millions of Americans who left the workforce during the recession will ever return to work. Friday’s report suggests that they are returning, which could allow job growth to continue without driving up inflation and threatening the broader economic recovery.
Of course, concerns about an overheating economy will be moot if China’s troubles wash up on American shores. But in December, at least, the job market seemed to be on a path of solid, sustainable growth.
Here are a few more observations from Friday’s report.
Watch the revisions: The monthly job figures are always volatile and subject to revision, but that’s especially true in December, when holiday-season hiring and other factors can make it tricky to adjust the numbers for seasonal patterns. That isn’t a reason to ignore Friday’s report, but it is a reason to focus even more than usual on the longer-run trends rather than the month-to-month shifts.
A slowing trend in job growth: Monthly job growth accelerated in December, but the more stable year-over-year trend now shows a clear sign of a slowdown. Employers are now adding jobs at a pace of about 2.7 million per year, down from more than 3 million at the start of the year.
It’s hard to know how worried to be about this slowdown. Early in the recovery, companies were making up for millions of jobs cut during the recession; it’s unsurprising that hiring would slow now that those gaps have been filled. And while job growth is slowing somewhat, it remains strongly positive; extrapolating out the recent trend, the U.S. would keep adding jobs into 2020. Still, the downward slope of the curve is a reminder that the recovery has now lasted more than six years, longer than the average post-World War II economic expansion.
Stronger wage growth: Average hourly earnings were up 62 cents in December from a year earlier, a 2.5 percent increase and the strongest gain of the recovery so far. (Earnings were actually down a penny from November, but the month-to-month numbers are too volatile to mean much.) Non-managers experienced similar gains, though their progress has been less steady.
Earnings are still rising more slowly than most economists would expect with the unemployment rate at 5 percent. But the acceleration is the latest sign that Americans are finally seeing the benefits of the recovery in their paychecks.
Better luck for the unemployed: Some 26 percent of unemployed workers found jobs in December, up from a low of 16 percent in 2010 and the highest mark of the recovery. (These figures can be confusing; if a quarter of the unemployed found jobs, why didn’t the total number of unemployed workers tumble, too? These are gross numbers, not net. Every month, millions of people find jobs and millions lose them.) Perhaps more importantly, fewer unemployed workers are giving up their search for work and leaving the labor force.
The strong job market is even reaching the long-term unemployed, one of the groups that has struggled most in the recovery. Just more than 2 million Americans have been out of work more than six months, down from 2.8 million a year ago and close to 7 million in the worst of the recession.