Private Payroll Trend Remains Solid in December, Wages Poised to Accelerate in 2020

posted by Michael Lewis on January 10, 2020 - 12:00am

2019 ended on a mostly consensus note. The private payroll jobs trend remained clearly healthy. The jobless rate set a new cycle low (marginally). Aggregate hours worked came in below expectations but, with productivity gains and a surge in net exports, FMI is still looking for +2.5% or so real GDP growth for 19Q4.
The only real disappointment today was wage growth, but we are not particularly concerned: historically in tight labor markets, wages can accelerate in short order. We continue to expect a solid pick up in average hourly earnings, reaching close to a +4% trend by the end of 2020.
Employment (December)
Private payrolls rose by +139K jobs in December (+129K including revisions). By itself, this was a bit disappointing. However, considered alongside the outsized +204K average in October-November, the private labor market remains indisputably healthy: it averaged more than +180K jobs/month in 19Q4 and more than +160K/month in 2019.
Aggregate hours worked rose only +0.1% in December and +1.1% annualized in 19Q4, well below estimates.
The jobless rate (U-3) set a new low for the cycle, 3.50% in December, narrowly besting the 3.51% in September*. The “under-employment” rate (U-6) did better, falling from a steady 6.9% in September-November to 6.7%; that is the lowest level of the cycle (and in the series since it was created in 1994). Labor participation held at 63.2% in December.