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.


5% real GDP increase can be expected in the first half of this year.5%.9% over last year. However. stocks fell and bond yields dropped in the aftermath of the report as investors reacted to the weak wage numbers. survey gain. The strong December jobs report came with unexpectedly weak wage data. the annual gain in compensation is 5. 2015 2 . ECONOMIC INSIGHTS / WEEK OF JANUARY 5-9. 10 out of 14 sectors had contracting wages. Average hourly earnings for all employees dropped 0.HOUSEHOLD SURVEY JOBS: December employment went up by 111.7% from 62. Household employment grew 1. there are some things to consider: • The index of average weekly hours was up 3.3%). the biggest drop since comparable records were kept in 2006.7% increase in average hourly earnings.000.6% due to a dip in the labor-force participation rate to 62. • Average weekly earnings were up 2. at 62. When an expected GDP price index gain of 1. with an • Consumer confidence has been very robust. the participation rate remains virtually unchanged in over a year. will keep on offsetting the numbers of workers reentering and entering the workforce. the number of unemployed decent weekly wages and low gas prices boosting will keep on dropping and the unemployment rate real incomes. The unemployment rate dropped two “ticks” to 5. also not far below the 2. but don’t look for the phrase using the word “patient” to be removed until after the first quarter.5% is factored in. very close to the nonfarm payroll pace of 289. Of course.3% from a year ago. Over the past three months.7% increase in average hourly earnings.0%. Still. Based just on more hours per week (up 3. THE UNDERCURRENT OF SLOW WAGE GROWTH: Nothing is ever perfect. the annual gain in compensation is 5. Declines were broad-based.7%. However. a 3. with improving labor market.0%.3%) plus the 1.0-3.2% from November.0% level a year from now (Economic Insights expects 5. is likely to dip to the 5.1% payroll Based just on more hours per week (up 3. roughly equivalent to the same increase in nominal GDP. roughly equivalent to the same increase in nominal GDP. This level of growth should keep the Federal Reserve (Fed) on track for a rate hike at the June meeting. It has been declining since 2008 and a flat trend will likely be in place going forward. hourly earnings were up a paltry 1.000. In that respect. On an annual basis. • Measures of households’ expected real income from the University of Michigan’s Consumer Confidence Survey picked up sharply in December.3%) plus the 1. It’s better to look at trends in this survey instead of one-month changes.9%.000. household employment gains are much more volatile than nonfarm payrolls.S.7%. household employment grew at an average rate of 278. Growing retirements among the “baby boomer” demographic U. the household survey generally lines up with the establishment survey.

But.1%). the ECB meeting on January 22nd. up to Eurozone economic data were bifurcated — decent retail data but weak industrial production and price data. respectively. ECONOMIC INSIGHTS / WEEK OF JANUARY 5-9. and the Netherlands (0. 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. ex-food and gas sales increased 1.4%). and Greek elections on January 25th. U.3%).6 versus 42. 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. both positives for GDP.3%).3%. down 0.6%.8 million annualized pace. Germany (0.8%).2 billion to $39.1%). The ISM manufacturing and nonmanufacturing PMIs softened up a bit. down from a 17. 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. The core CPI was up 0.S. Germany (0.171.600 in 2000). jobless claims fell by 4. Near term. respectively. declining to 55.S.4%). Last week.7 and to 56. The headline CPI fell as well.2 from 59. The minutes generally affirmed Janet Yellen’s statements at the meeting’s press conference. the lowest level since 1997! Vehicle sales increased at a 16. economy but worried about external risks to the United States. The committee viewed the decline in oil prices as a positive for the U. France (0. For 2014 as a whole. Most importantly.5 from 58. jobless claims reached the lowest average since 2000 (308.08 million (0.500 versus 299.1%). and the Netherlands Outright Monetary Transactions program expected January 14th.AROUND THE WORLD IN LESS THAN 600 WORDS The U.7% and 0.7 in the previous week. The Bloomberg Consumer Comfort index continued to gain steam reaching another cyclical high.1%). November retail sales for the currency zone increased 0. Lower gasoline prices are already boosting consumer spending in Europe.2% year-over-year with sharply falling gasoline prices. one driver of market volatility.000 to 294.8%. the trade deficit shrank (from $42. Challenger showed that layoffs totaled 483.000.S. France (0.0 billion) and wholesale inventories picked up (0. November hard data were mixed. Nothing was very surprising. 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. activity data pointed to a pullback in growth momentum. Industrial production contracted in Spain (0. annualized pace last month. 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.4%. 43. The ECJ ruling could affect the scope of any asset purchase program from the ECB. Factory orders and construction spending dropped by 0. Industrial production contracted in Spain (0. 2015 3 . Confidence and consumer data remained decent.3.

in line with S&P’s rating. Bloomberg reported that the Chinese government was planning ECONOMIC INSIGHTS / WEEK OF JANUARY 5-9. down 3. The last key news item was Fitch’s downgrade of Russia. and was in contrast to the weak manufacturing PMI at 49. prices. price inflation in China has a $1 trillion stimulus program.7% in November.6 (released in the previous week). The headline CPI increased 1. the Chinese government quickly emphasized that this money should not be viewed as similar to the 2008 stimulus program.5% yearover-year as the PPI declined for a 34th month in a row.3% versus 2. then it will be junk…. Like most of the rest of the globe. The risk is that if both S&P and Fitch downgrade Russian debt again.stay tuned! weakened. The theme for the Chinese government continues to be targeted stimulus and growth stabilization. The HSBC services PMI increased to the highest level in three months – up to 53. Fitch downgraded Russia one level to just above junk with a negative outlook. 2015 4 .Bloomberg reported that the Chinese government was planning a $1 trillion stimulus program.0. with concern over a severe recession this year. The Chinese news flow focused on PMIs. However. and stimulus.4 from 53.

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