Upbeat employment report underscores U.S. economic strength

Upbeat employment report underscores U.S. economic strength

The torrid hiring in December far outstripped the 180,000 jobs investors had been anticipating and could help ease fears that the economy's expansion - now in the middle of its 10th year - may be coming to an end.

"The labor market is very strong even though the economy appears to be slowing", said Eric Winograd, senior US economist at the investment management firm AllianceBernstein. Instead, employers added the highest number of jobs since February 2018, and the second-highest number of jobs added during any month of the Trump administration.

The labor market, however, is unlikely to perform as well this year. That would amount to 1.87 million for 2019, less than the 2.27 million added in the first 11 months of 2018.

Average hourly pay improved 3.2 percent from a year ago.

Job-gain estimates in Bloomberg survey range from 160,000 to 225,000.

The unemployment rate increased to 3.9 percent from a near 49-year low of 3.7 percent in November as a strong labor market pulled some 419,00 jobless Americans from the sidelines.

Wages advanced 3.1 percent on a year-on-year basis in November.

While there is still little evidence of inflation in the economy, the strong December jobs report may influence the Federal Reserve to stay on its stated course of raising interest rates at least twice in 2019. Fewer workers worked part-time for economic reasons in December.

"The jump in payrolls in December would seem to make a mockery of market fears of an impending recession", said Paul Ashworth, chief economist at Capital Economics in Toronto.

The unemployment rate nudged higher to 3.9%, but is still near historic lows.

"The claims data suggest that conditions in the labor market have softened relative to a few months ago when the claims readings were very upbeat, but the extent of any deterioration is not entirely obvious and does not look extreme at this point", said Daniel Silver, an economist at JPMorgan in NY.

In recent weeks, financial markets have plunged amid concerns that the US could be in a recession by 2020.

US stocks rallied on the employment report on Friday and extended gains after Powell's comments. The dollar dropped against a basket of currencies, while U.S. Treasury yields fell.

Employment at construction sites rebounded last month, with companies hiring 38,000 employees after adding no workers in November.

"This should, at least for today, mute expectations that the Fed is off the table completely this year", said Omair Sharif, a senior economist at Societe Generale in NY. It needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.

Data this week showed factory activity weakened across much of Europe and Asia in December, with Chinese manufacturing contracting for the first time in 19 months.

Businesses are still searching for more workers. A strong holiday shopping season is expected to have boosted retail employment while transportation and warehousing payrolls probably rose, driven by seasonal hiring.

Jobs in health care increased by 50,000 last month, with most of the employment centered around ambulatory care and hospitals.