Friday, January 6, 2017

"Economists React to the December Jobs Report: ‘Very Close to Full Employment’"

Job creation slowed in December but other details pointed to a tightening labor market. The economy added 156,000 jobs last month, while the jobless rate rose slightly to 4.7% as more Americans entered the labor force. Workers’ hourly wages grew 2.9% over the past 12 months, the strongest yearly gain in more than seven years. Here’s how economists and analysts reacted to Friday’s report.
“For the year, the economy averaged job creation of about 180,000 per month—a solid result, but one that represents the slowest pace since 2012. While this is partially reflective of the slowdown in the pace of economic growth, it also reflects a labor market that is increasingly tight. Employers are simply having a harder time filling open positions as the economy nears full employment.“—Jim Baird, Plante Moran Financial Advisors

“This solid report further underlines the Fed’s point in December that the economy is now very close to full employment. Job growth was decent and wage growth is picking up nicely. But the only real show in town is Donald Trump’s inauguration. The economy is doing well and doesn’t obviously need the shot in the arm that Trump is planning on providing. The interaction between the Fed and Trump, and the resulting policy mix, is likely to be the defining theme for investors this year.”—Luke Bartholomew, Aberdeen Asset Management

“The rebound in hourly earnings reflects the unwinding of the calendar quirk which depressed the November data, and lifts the [year-over-year] rate to 2.9%, the highest since June 2009. With productivity growth trending at less than 1%, the Fed cannot allow wage inflation to rise much above 3% if it is to forecast 2% inflation with a straight face….In short, this report tells the Fed not to delay further tightening. We think rates will rise again as soon as March, provided we have some clarification on the likely extent of fiscal easing by then.”—Ian Shepherdson, Pantheon Macroeconomics

Also at Real Time Economics:
The December Jobs Report in Seven Charts