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Jobs Report: What to Watch For U.S. Job Market Ends 2016 on a Tepid Note
(about 3 hours later)
The Labor Department is set to release jobs data for the final month of 2016 at 8:30 a.m. on Friday. The announcement will be the final jobs report of the Obama presidency and the first since the Federal Reserve Board raised interest rates last month, for only the second time in a decade. The American economy added 156,000 jobs last month, capping the final full month of President Obama’s term on a tepid note, even as his successor, Donald J. Trump, promises that much bigger gains could be around the corner.
This is what you should watch for: The unemployment rate, which fell sharply in November, edged up to 4.7 percent, according to the Labor Department report on Friday. Before the announcement, economists had been looking for a gain of 175,000 jobs for the month.
Economists estimate that the United States added 175,000 jobs in December, just a bit below the average for the first 11 months of the year, but a surprise either way is possible. New weekly unemployment claims inched higher in December, which could portend weakness. On the other hand, consumer sentiment has been very strong, and the stock market has been surging — factors suggesting that the economy has plenty of underlying strength. For all his criticism of Mr. Obama’s economic stewardship during the campaign, Mr. Trump inherits an economy that is fundamentally solid. Consumer sentiment, corporate profits and the stock market are all at or near multiyear highs.
Unemployment plunged in November to 4.6 percent from 4.9 percent the month prior. Given that drop, economists think a slight uptick is possible for December, especially if more people start to seek work again, returning to the labor force. To be sure, the economic worries that enabled Mr. Trump to capture the Rust Belt and in turn the White House persist: The future for Americans without a college degree or specialized skills is dim; millions of former workers are still on the sideline; and factory jobs are disappearing.
In three words: average hourly earnings. Wages have been the missing link for most of the recovery, although pay has finally begun to rise for many workers. Economists are looking for average hourly earnings to rise by 0.3 of a percentage point in December, bringing the year-over-year increase to 2.8 percent. Although it is not reflected in the December figures, many low-wage workers are receiving a raise this year, as 19 states increased the local minimum wage. Some of the increases were substantial, with Arizona, Maine and Washington each raising the floor by $1.50 or more per hour.
If the gain is higher than that, it would be the biggest yearly jump in wages since the recession ended in 2009. Even in California, where the wage gain is not as steep, rising 50 cents an hour, one in 10 workers has received a raise. And minimum-wage gains can have a spillover effect, pushing up pay for workers just above the bottom salary tier.
As on many issues, Mr. Trump has sent conflicting signals on this subject, suggesting at times during the campaign that state increases were justified, but warning in primary debates that wages were “too high.”
In the past, many Republicans have opposed mandated minimum-wage increases, arguing that for every lift, more low-wage jobs are cut or left unfilled as employers struggle with having to pay more and still eke out a profit.
Among economists, the costs and benefits of rising minimum wages are the subject of considerable debate, and experts will be watching sectors like retail, restaurants and food service for signs of a dip in hiring, at least in the short term.
While the monthly jobs reports is no longer grist for the campaign trail mill, as it was for most of last year, investors and traders are now closely watching the data for clues to when the Federal Reserve Board may next raise interest rates.
Last month, the Fed increased interest rates for only the second time in a decade, and policy makers signaled that three more moves could come this year. Some economists think two increases are more likely, and the Fed will take its cues in part from the labor market, as well as fiscal policy under the new administration.