US: Payroll gains slow but wage gains better in December - Nomura

According to the Bureau of Labor Statistics (BLS), nonfarm payrolls increased by 156k in December, slightly weaker than expectations (Nomura & Consensus: 175k) as noted by analysts at Nomura.

Key Quotes

“Private payrolls grew 144k, also below expectations (Nomura & Consensus: 170k), implying that government payrolls increased by 12k. The two-month payrolls net revisions were positive, increasing the total tally by 19k. Altogether, the net revision offset the small downside surprise in the December nonfarm payrolls gains.”

“The unemployment rate picked up to 4.7% (4.716%) from 4.6% (4.646%). The labor force participation rate was at 62.7% and November’s rate was lowered by 0.1pp to 62.6%, which likely pushed up the unemployment rate slightly as some workers joined the job market encouraged by better job prospects.”

“On the wage front, average hourly earnings increased strongly by 0.4% m-o-m (Nomura: 0.2% m-o-m, Consensus: +0.3% m-o-m) following a 0.1% m-o-m decline in November. On a year-over-year basis, it is up 2.9%. The strong jump in earnings will likely be a welcome sign for some FOMC participants who described the recent trend in wage growth as sluggish, as reported in the minutes of the December FOMC meeting. Yet, compared to recent quarterly trends, the latest pick-up does not necessarily imply an outsized acceleration in wage growth at the end of the year. It rather appears to be a return to a previous trend after negative payback in November following a transitory surge in earnings in October when Hurricane Matthew cut the average workweek short.”

“In a nutshell, the December report shows that the labor market made further progress toward full employment levels, with a healthy pace of job gains and steady unemployment rate. Wage growth was strong over the month as it returned to its previous trend. The improvement in the labor participation rate suggests that steady gains in payrolls are slowly encouraging more potential job-seekers to join the labor market. As for the near-term policy debate, a single month of wage growth data may not inform much, but a sustained improvement in the pace of wage growth may be noteworthy.”