December jobs report caps off robust year
Strong December hiring propelled the US economy to its best two years of job creation since the late 1990s. But can it continue?
As the nation heads into a presidential election year, most analysts project the economy to maintain its momentum and continue the steady expansion that has added jobs for 63 consecutive months — or more than five years. Strong consumer spending, which accounts for about 70 percent of US economic activity, is expected to keep the US economy on track as unemployment falls and incomes rise — despite the slowdown in China and turmoil that has followed in financial markets.
“The US job market seems to be on a roll,” said Nariman Behravesh, the chief economist for IHS Inc., a forecasting firm in Lexington. “Despite everything that is going on around the world, we are still doing pretty well.”
US employers added 292,000 jobs last month, the Labor Department reported Friday, while unemployment held steady at 5 percent. For all of 2015 the nation gained nearly 2.7 million jobs, after adding 3.1 million in 2014, for a total of 5.8 million . It was the strongest two-year period of job growth since 1998 and 1999, when the economy created 6.2 million jobs.
Economists project the economy will expand at about the same rate as 2015 — 2.5 percent — although hiring will increase at a slightly slower pace, according to a Bloomberg survey. Forecasters expect the nation to add an average of 184,000 jobs a month this year, compared with about 220,000 in 2015.
Unemployment, which averaged 5.3 percent last year, is expected to slide to 4.8 percent in 2016.
Despite strong job gains, the labor market still has pockets of weakness. Millions of Americans are working part-time jobs because they can’t find full-time work, or have abandoned job searches. Wages, meanwhile, have barely risen for many workers.
The upbeat news out of the Labor Department was in sharp contrast to the reaction on Wall Street. The Dow Jones industrial average fell another 168 points Friday, following Thursday’s rout of nearly 400 points. The Dow lost more than 6 percent of its value over the week, closing at 16,346.
Mark Vitner, a senior economist at Wells Fargo and Co., in Charlotte, N.C., said the sell-off was driven by international events, primarily the turmoil in Chinese markets, a slowing global economy, and plunging oil prices, a sign of weakening global demand.
These developments will hurt American companies that sell in foreign markets, but international trade accounts for a small share of the US economy, which is primarily driven by domestic consumer spending.
Economists say the nation appears to have entered a cycle in which falling unemployment increases income, which in turn supports consumer spending, which increases demand for goods and services, and leads to more hiring by companies. And while plunging oil prices have upset financial markets, they are putting even more money into consumers’ pockets.
“We’re not immune to what goes on in the rest of the world,” Vitner said. “But we can go an awful long time without worrying about what’s going on in the rest the world.”
Job gains in December were spread across most industries, including construction, health care, professional services, and food services. Job growth in health care — a leading Massachusetts industry — was particularly robust. The industry added an average of 40,000 jobs a month in 2015, compared with 26,000 a month in 2014, according to the government.
At K.A. Recruiting Inc., a Boston company that helps hospitals and health companies find nurses, physician assistants, and other workers, cofounder K.C. Carpenter said demand from employers has been “almost overwhelming.” Last year was the busiest in the company’s eight-year history, Carpenter said, and it shows no sign of slowing — he currently has 500 positions to fill.
“Every indication from our clients is that is going to continue,” he said.
But even as demand for workers has grown nationwide, wages are increasing slowly. Over the past year, average hourly wages rose by 2.5 percent, still well below the roughly 3.5 percent pace that economists say is typical for a healthy economy.
Economists expect wages to increase further in 2016 as the country nears full employment — about 4.5 percent, according to some estimates — and businesses are forced to compete more fiercely for workers. Those gains, however, are likely to be concentrated among workers with higher skills and levels of education, economists said.
Frederick Goff, chief executive officer of jobcase.com, a Cambridge company that connects workers and employers in lower-skilled fields, said the benefits of the expansion are not shared evenly. He said he is seeing home improvement companies and banks needing to fill more entry-level jobs, but millions of people are still struggling to find work, he said.
About 6 million people in December were stuck in part-time jobs, even though they preferred full-time employment, unchanged from the previous month.
“A subset of Americans are enjoying full employment,” Goff said. “But we are far from full employment.”