156,000 Payroll Jobs, 4.7% Employment

Popular Economics Weekly

The highlight of the December unemployment report was that wages rose 2.9 percent annually. And nonfarm payrolls rose a lower-than-expected 156,000 in December but added a net 19,000 to the two prior months (November now at 204,000 and October at 135,000) in revisions, said the U.S. Bureau of Labor Statistics.

The unemployment rate rose slightly to 4.7 percent from 4.6 percent because 184,000 more jobseekers entered the workforce. The biggest job gains were in Education and health services (70,000), followed by Leisure and hospitality (24,000), and Manufacturing (17,000), which was a big surprise, according to consensus predictions.

Graph: Marketwatch

But manufacturing’s employment surge shouldn’t be a surprise, as both the service and industrial sectors showed strong growth in December. The ISM manufacturing composite index hit 54.7, up a sharp 1.5 points from November for the best score in 2 years.

New orders were the clear highlight of the report, at 60.2 for another 2 year high and up 7.2 points which is the sharpest monthly jump of the entire cycle. The good news continues with production up 4.3 points to 60.3, employment up 8 tenths to 53.1, and export orders at 56.0 which is a 2-1/2 year high. The strength, like it was in the manufacturing PMI posted earlier on Tuesday, is being reflected in prices with input costs up 11.0 points to 65.5 which is a 5-1/2 year high.

Hiring in the December ISM non-manufacturing survey also showed that new orders are unusually strong where the index, at 57.2, matches November as 2016's best. New orders are up 4.6 points to 61.6 to signal the strongest rate of monthly growth since the middle of last year. Business activity is also very strong, at 61.4.

But the rise in interest rates may slow down growth in 2017, as Econoday reports the rise in the dollar is affecting export prices and a consequent slowdown in exports. The worst economic news of late comes from the international trade in goods report where the deficit widened sharply in November to $65.3 billion from October's $61.9 billion, reports Econoday. Goods exports fell 1.0 percent in the month to $121.7 billion as tracked in the blue columns of the graph. Food exports have been especially soft as have vehicle exports, and capital goods exports fell very sharply in a reminder that the lack of business investment is a global issue.

But business investment may rise, when and if tax reform happens for the $ trillons held overseas by U.S. corporations. The monies for the proposed $1 trillion in infrastructure improvements have to come from somewhere, and corporations may be induced to invest some of those profits domestically.

Harlan Green © 2016

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