The job market capped off 2014 with another month of robust gains, pushing hiring to its best annual growth since the financial crisis.
The US economy added 252,000 jobs in December, handily beating economists’ expectations of about 240,000 added jobs. The unemployment rate ticked down to 5.6 percent – it’s lowest level since 2008. Additionally, November’s already-strong jobs numbers were revised upward, from 321,000 to 353,000.
It was “a solid report in terms of payroll and employment growth,” MFR Inc. economist Joshua Shapiro writes in an e-mailed analysis. The year's end was consistent with the general trend for 2014. Job growth has been strong all year. In total. The US economy added 2.95 million jobs in 2014, up from 2.31 million in 2013. An estimated 866,000 were added in the final three months, making it the best financial quarter in terms of job growth since the 2008 financial crisis.
Some of the most impressive growth came from the construction sector, which added 48,000 new jobs after several months of job growth in the 15,000 to 20,000 range. Manufacturing, the service service sector, and government jobs also saw growth. The average private sector work week held steady at 34.6 hours
Still, despite consistently strong headline numbers, experts aren’t quite ready to celebrate. “The big fly in the ointment has been hourly earnings data,” Mr. Shapiro writes. In November, wage growth had finally started to show signs of life, with hourly earnings rising 0.4 percent. That growth reversed itself in December; hourly earnings fell 0.2 percent last month. And as Shapiro points out, the dip can’t be blamed on the high number of seasonal workers that December typically brings. “The softness was pervasive, so the headline disappointment was not due to the mix of jobs, and November was revised down to +0.2 percent from originally reported +0.4 percent,” he writes. “On a year over year basis, December [wage gains grew] 1.7 percent…which is abysmal.”
Still, if the unemployment rate keeps falling, it should translate to a pickup in wage growth. It’s just a matter of when. “We maintain our view that further declines in the unemployment rate will result in faster wage gains in the coming year,” Barclays Research economist Michael Gapen wrote in an e-mailed statement.
In the meantime, Americans gloomy over their stagnant paychecks have a few things working to cheer them up. Gas prices continue to fall, with the average price per gallon at $2.17 and prices below $2 per gallon in more than a dozen states. The stock market, despite a few recent dips, is still chugging along near record territory, and a number of political and economic factors are breaking the right way for the housing market.
Such tailwinds have Americans more and more optimistic about the economy in general: a recent CNN/ORC poll found that a majority of Americans rated the economy as “somewhat good” or “very good,” for the first time in nearly seven years. The Thompson Reuters/University of Michigan Consumer sentiment survey, too, is now at an eight-year high.
Those good feelings could encourage more Americans who have opted out of the labor force to start looking for jobs, hopefully easing another major ongoing weak spot in the monthly jobs reports: the labor force participation rate, which has been hovering around lows not seen since the late 1970s. It fell again, to 62.7 percent, in December.
“The participation rates of the youngest workers have been declining, which is more of a barometer of limited job prospects than of anything demographic in nature,” Shaprio writes. “As the labor market continues to recover, some of these discouraged workers ought to return to the labor force, which, all else equal, would tend to slow the decline in the unemployment rate.”