By Dean Baker
The Bureau of Labor Statistics reported that the economy added 145,000 jobs in December. There were modest downward revisions to the prior two months’ data, but the three-month average was still a solid 184,000. The unemployment rate was unchanged at 3.5 percent. While the overall employment-to-population ratio (EPOP) did not change, the EPOP for prime-age workers (ages 25-54) edged up 0.1 percentage points to 80.4 percent. This is 0.1 percentage points above the prerecession peak — a new high for the recovery.
The rise in prime-age EPOPs was driven by a rise of 0.3 percentage points in the EPOP for prime-age women. While the EPOP for prime-age men drifted down 0.1 percentage points, it is still 0.5 percentage points above the year-ago level at 86.6 percent. This is still 1.4 percentage points below the prerecession peak. The 74.4 percent EPOP for prime-age women is above the prerecession peak, but still 0.5 percentage points below the peak hit in 2000. There seems little reason to believe that the EPOPs for both men and women cannot rise further if the labor market remains strong.
The most notable change among other demographic groups was a 0.7 percentage point rise in the unemployment rate for black men to 5.8 percent, 0.6 percentage points below its year-ago level. The monthly movements in this figure are erratic, but this is large enough to be concerned.
By education level, the unemployment rate for college grads fell 0.1 to 1.9 percent, a new low for the recovery. Even with this decline, college grads are the only educational group with an unemployment rate above their prerecession low (1.8 percent) and well above the 1.5 percent low hit in 2000. By comparison, the 3.7 percent unemployment rate for workers with just a high school education is 0.3 percentage points below the prerecession low but still 0.5 percentage points above the low hit in November of 1999.
The other noteworthy change in the household survey was a jump of 1.2 percentage points in the share of unemployment attributable to voluntary quits to 14.5 percent. This is just below the 14.8 peak for the recovery and closer to what would be expected with a 3.5 percent unemployment rate.
The payroll survey showed a weakening in employment growth in most industries. Manufacturing lost 12,000 jobs in December. While employment is up by 46,000 over the last year, total weekly hours have actually fallen by 0.4 year-over-year. The high-paying professional and technical services sector added just 9,200 jobs last month, well below the 23,000 average for the last year; although this may just be a bounce back from the growth of 33,600 reported for November.
Trucking lost 3,500 jobs in December and is now down 2,200 over the last year. This could be indicative of either larger weakness in the economy or a considerable gain in productivity in the sector. Coal mining lost 1,200 jobs in December, employment is down 700 over the last year.
Retail was the biggest job gainer, adding 41,200 jobs, driven primarily by a 33,200 rise in employment in clothing stores. The latter rise reversed a drop of 22,300 reported for November. This is most likely just a problem of seasonal adjustments. Health care added 28,100 jobs, construction added 20,000 jobs, and restaurants added 15,900.
While job growth seems healthy, wage growth continues to slow. The average hourly wage is up just 2.9 percent from the year-ago level, down from the 3.4 percent growth reported for February. By sector, the strongest growth continues to be in the lowest-paying industries, with the average hourly wage rising 4.2 percent over the last year in retail and 3.1 percent in leisure and hospitality. Wage growth has slowed sharply in both sectors from peaks hit in February.
The share of women in payroll employment edged above 50 percent in December to 50.04 percent. While women had briefly been more than half during the Great Recession, this was due to the massive job loss in the male-dominated construction and manufacturing sectors. This increase is likely to be permanent.
This should be seen as a mostly positive jobs report, with the economy still adding jobs at a healthy pace. However, the continued slowing of wage growth provides real grounds for concern. It means both that workers are not getting the gains we should expect with a 50-year low in the unemployment rate, and that there is still room for further expansion without fear of inflation.