U.S. Labor Market Improvement Slows During December

Nonfarm payrolls increased 223,000 in December following an increase of 256,000 in November and 263,000 in October, revised from 263,000 & 284,000, respectively. Expectations had been for a 188,000 rise in the Action Economics Forecast Survey. The average rise of 247,300 during the last three months remains below a three-month high of 602,000 in February of 2022.

Average hourly earnings were lifted 0.3% last month after increasing 0.4% in November and 0.3% in October, revised from 0.6% and 0.5%, respectively. A 0.4% December rise had been expected. The 4.6% y/y earnings gain remains above its 2.9% y/y rise before the pandemic as competition for labor increased.

The unemployment rate, measured in the household survey, fell to 3.5% last month, a three-month low, versus an expected rate of 3.7%. Household employment rose 717,000 after falling in each of the prior two months. The labor force rose by 439,000, and y/y growth of 1.6% stood below its 2022 high of 2.4% in March. The overall unemployment rate, including workers who were marginally attached & working part-time for economic reasons, eased to 6.5% from 6.7%.

In the establishment survey, private-sector employment rose an improved 220,000 (3.2% y/y) after rising 202,000 in November. Factory sector jobs rose 8,000 (2.9% y/y) for a second straight month. Construction sector employment increased 28,000 (3.2% y/y) following a 15,000 November improvement.

Private service-producing sector employment increased 180,000 in December (3.2% y/y) after improving 175,000 in November. Increases varied greatly amongst service sector categories. Leisure & hospitality employment rose 67,000 (6.5% y/y). Education & health care jobs rose 78,000 (4.0% y/y) while trade, transportation & utilities employment firmed 27,000 (1.6% y/y). Financial activities employment rose 5,000 (1.5% y/y). Elsewhere, the number of jobs fell. Information services jobs declined 5,000 (+4.8% y/y). Professional & business services employment fell 6,000 (+2.6% y/y).

Government sector payrolls rose 3,000 last month (1.5% y/y) after surging 54,000 in November. Local government jobs increased 21,000 (2.0% y/y). State government employment fell 19,000 (+1.0% y/y). Federal government payrolls edged 1,000 higher (-0.1% y/y).

Private-sector average hourly earnings rose 0.3% in December. Earnings in the goods-producing sector rose 0.4% (4.4% y/y). Earnings in construction rose 5.8% y/y followed by a 3.6% y/y gain in the factory sector. In the private services-sector, earnings rose 0.3% (4.6% y/y). The 6.4% y/y rise in leisure & hospitality earnings remained below the 13.3% December 2021 peak, and professional & business sector earnings increased 4.9% y/y. Financial activities earnings rose 4.4% y/y.

The length of the average workweek dipped to 34.3 hours in December. The workweek in the goods-producing sector held at 39.7 hours. The construction sector average workweek rose slightly to 38.5 hours while the factory sector workweek edged lower to 40.1 hours. The average workweek in the private service sector eased to 33.3 hours and remained below the 33.9 hour high in early-2021. The aggregate weekly hours index, a key indicator of production and income, fell 0.3% m/m in December (-1.4% y/y).

The household survey indicated a decline in the jobless rate to 3.5% as the size of the labor pool rose. The labor force participation rate rose to 62.3% last month after two months at 62.2%. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 37.0%. For workers aged 20-24, the rate rose to 71.3% but remained below a 72.0% December, 2021 high. For workers aged 25-54, the rate edged up to 82.4%. For individuals 55 and over, the rate rose to 38.8%.

The employment/population ratio for all workers in November improved m/m to 60.1% and remained above the 59.5% level twelve months earlier. It is still below its reading of 61.1% in February, 2020 just prior to the pandemic.

The average duration of unemployment fell in December to 19.5 weeks and remained below a 32.0 week high in June of 2021. The median duration of unemployment edged higher to 8.9 weeks but stood below its 19.9 week high in June 2021. The ranks of those individuals unemployed for 27 weeks or more fell 12.0% m/m and remained down 46.3% y/y.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.