US labor market trumped expectations

The data ...

Non-farm payrolls rose by 256K in December, well above expectations (consensus 160K, Commerzbank 150K). The unemployment rate fell from 4.2% to 4.1%. Average hourly earnings rose by 0.3% from the previous month. In year-on-year terms, wages rose by 3.9% after 4.0% in November.

... and the background

The US labor market showed a surprisingly strong performance in December. The 256k increase in jobs was the largest since March. Even more jobs were created than in November (212k), although the end of strikes and the return of employees to their workplaces after the hurricanes pushed up the November increase.

While one month's data should not be overstated and the numbers could still be revised, there is little sign of a downward trend in job growth in recent months. At the same time, the other details of the report were also favorable. The rise in jobs is quite broad-based, with the exception of manufacturing. The volume of labor (total hours worked) rose by 0.2%, with the previously reported dip in October being revised away. The unemployment rate surprised with a slight drop, even though more people entered the labor market. Broader measures of underemployment fell even more sharply.

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