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The U.S. economy
recorded the strongest
year of job growth since
1999 and December was
no exception. But, wage
growth disappointed
in the otherwise rosy
December jobs report.

Employment growth was strong throughout 2014 and December was no
exception. The U.S. economy recorded the strongest year of job growth since
1999. Employers added 2.95 million jobs, an average of 246,500 per month. It
must be admitted that the average unemployment rate this past year was 6.2%
compared to a December rate of 4.0% 15 years ago. Still, the United States ended
2014 with a total of 140.3 million nonfarm workers, up 2.1% from 2013!
Nonfarm payrolls rose 252,000 in December and the civilian unemployment rate

High-frequency U.S.
data pointed to robust,
albeit slower growth
in the fourth quarter;
lower oil prices are
showing up in a broad
range of data globally;
and risks are elevated
in Europe.

dropped to 5.6%, the lowest since June 2008. Establishment survey revisions to
November and October added a total of 50,000 jobs, from 321,000 to 353,000
and 243,000 to 261,000 in November and October, respectively.

• Private employment was up by 240,000 in December, slightly above
the 2014 average of 238,400 per month.
• Manufacturing increased 17,000 for December in line with the annual
gain of 16,000 jobs per month.
• Construction rose a robust 48,000 in December, well above the average gain
for the year of 24,167.


• Healthcare rose by 4,000 in December and averaged 26,000 per month
in 2014.
• Wholesale and Retail Trade added 17,700 jobs in December, with an
average monthly again of 30,000 for the year.
• Government employment growth averaged 7,500 per month reversing
a multi-year negative trend.
One final point of interest is oil and gas extraction with no increase in
employment in December. For all of 2014, this sector’s employment explained

Robin Anderson, Ph.D.

only 0.4% of the overall payroll increase. Keep in mind that the industry is only
0.6% of total nonfarm payrolls; any slump in oil and gas employment over the
next 12 months will likely have very little impact on total U.S. jobs.


0%.9%.S. However.3%) plus the 1. On an annual basis. Growing retirements among the “baby boomer” demographic U. household employment gains are much more volatile than nonfarm payrolls.9% over last year.7% increase in average hourly earnings. Household employment grew 1.7% from 62. When an expected GDP price index gain of 1. also not far below the 2. Based just on more hours per week (up 3.HOUSEHOLD SURVEY JOBS: December employment went up by 111. very close to the nonfarm payroll pace of 289. It has been declining since 2008 and a flat trend will likely be in place going forward.7%.000.000. • Measures of households’ expected real income from the University of Michigan’s Consumer Confidence Survey picked up sharply in December. Still. but don’t look for the phrase using the word “patient” to be removed until after the first quarter. roughly equivalent to the same increase in nominal GDP. THE UNDERCURRENT OF SLOW WAGE GROWTH: Nothing is ever perfect.2% from November. Declines were broad-based. with improving labor market. 2015 2 . The strong December jobs report came with unexpectedly weak wage data. the participation rate remains virtually unchanged in over a year. • Average weekly earnings were up 2.5%. 10 out of 14 sectors had contracting wages. roughly equivalent to the same increase in nominal GDP. household employment grew at an average rate of 278. It’s better to look at trends in this survey instead of one-month changes.7%. This level of growth should keep the Federal Reserve (Fed) on track for a rate hike at the June meeting.1% payroll Based just on more hours per week (up 3. The unemployment rate dropped two “ticks” to 5. However. the annual gain in compensation is 5. the household survey generally lines up with the establishment survey. Of course. the annual gain in compensation is 5. at 62.5% real GDP increase can be expected in the first half of this year. hourly earnings were up a paltry 1.0% level a year from now (Economic Insights expects 5. a 3.3%) plus the 1. survey gain.3%).0-3. Over the past three months.6% due to a dip in the labor-force participation rate to 62.7% increase in average hourly earnings. the number of unemployed decent weekly wages and low gas prices boosting will keep on dropping and the unemployment rate real incomes.5% is factored in. stocks fell and bond yields dropped in the aftermath of the report as investors reacted to the weak wage numbers. the biggest drop since comparable records were kept in 2006.0%. is likely to dip to the 5. there are some things to consider: • The index of average weekly hours was up 3. Average hourly earnings for all employees dropped 0.000. will keep on offsetting the numbers of workers reentering and entering the workforce.3% from a year ago. In that respect. with an • Consumer confidence has been very robust. ECONOMIC INSIGHTS / WEEK OF JANUARY 5-9.

ECONOMIC INSIGHTS / WEEK OF JANUARY 5-9. ex-food and gas sales increased 1.000 to 294. annualized pace last month. There are at least three events in the next two weeks or so that markets are watching: the European Court of Justice’s (ECJ) ruling on the Eurozone economic data were bifurcated — decent retail data but weak industrial production and price data.AROUND THE WORLD IN LESS THAN 600 WORDS The U.7 in the previous week. activity data pointed to a pullback in growth momentum.8%.6%.2 billion to $39. Industrial production contracted in Spain (0.S. economy but worried about external risks to the United States. The size of 500 billion euros could be a disappointment to investors expecting a total balance sheet expansion of about 800 billion euros in one year.7 and to 56. Industrial production contracted in Spain (0.171. Germany (0.1%). down 0. Bloomberg and Reuters reported that European Central Bank (ECB) officials were considering a range of options for a quantitative easing program including a 500 billion euro volume for the program and dividing asset purchases across the ECB and each country’s central bank.7% and 0. Lower gasoline prices are already boosting consumer spending in Europe. and the Netherlands Outright Monetary Transactions program expected January 14th.4%).5 from 58.S.4%. and Greek elections on January 25th. respectively. news out of Europe could continue to be The other key release for the United States was the December Federal Open Market Committee (FOMC) meeting minutes.1%). Most importantly.8%). France (0. the FOMC expected to start raising rates if core inflation stayed at its current levels and if they felt comfortable that inflation would return to the 2% target over time. and the Netherlands (0. Confidence and consumer data remained decent. jobless claims reached the lowest average since 2000 (308.0 billion) and wholesale inventories picked up (0. declining to 55. The committee viewed the decline in oil prices as a positive for the U. Factory orders and construction spending dropped by 0. The Bloomberg Consumer Comfort index continued to gain steam reaching another cyclical high.08 million (0. But. 2015 3 . the trade deficit shrank (from $42. one driver of market volatility. The minutes generally affirmed Janet Yellen’s statements at the meeting’s press conference.3. the lowest level since 1997! Vehicle sales increased at a 16. up to Eurozone economic data were bifurcated — decent retail data but weak industrial production and price data. November hard data were mixed.1%).6 versus 42.000. both positives for GDP.4%). Challenger showed that layoffs totaled 483.2% year-over-year with sharply falling gasoline prices. down from a 17. 43. Near term.600 in 2000). For 2014 as a whole. Nothing was very surprising. U. respectively. November retail sales for the currency zone increased 0.S. the ECB meeting on January 22nd. Last week.8 million annualized pace.3%).3%).1%).2 from 59. The headline CPI fell as well. Germany (0. The core CPI was up 0.3%. The ISM manufacturing and nonmanufacturing PMIs softened up a bit.500 versus 299. The ECJ ruling could affect the scope of any asset purchase program from the ECB. France (0. jobless claims fell by 4.

6 (released in the previous week).0. price inflation in China has a $1 trillion stimulus program. 2015 4 . with concern over a severe recession this year.4 from 53. and stimulus.Bloomberg reported that the Chinese government was planning a $1 trillion stimulus program.stay tuned! weakened. The last key news item was Fitch’s downgrade of Russia. The theme for the Chinese government continues to be targeted stimulus and growth stabilization. The Chinese news flow focused on PMIs. Like most of the rest of the globe. Bloomberg reported that the Chinese government was planning ECONOMIC INSIGHTS / WEEK OF JANUARY 5-9.3% versus 2. Fitch downgraded Russia one level to just above junk with a negative outlook. the Chinese government quickly emphasized that this money should not be viewed as similar to the 2008 stimulus program. and was in contrast to the weak manufacturing PMI at 49. The headline CPI increased 1. in line with S&P’s rating. then it will be junk….5% yearover-year as the PPI declined for a 34th month in a row. prices. down 3.7% in November. The HSBC services PMI increased to the highest level in three months – up to 53. However. The risk is that if both S&P and Fitch downgrade Russian debt again.

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