December Jobs Numbers Below Expectations
Jan. 6, 2006 — -- The Bureau of Labor Statistics released its monthly jobs report this morning showing that total employment increased by 108,000 new workers in December. Many economists had forecast 200,000 new jobs, so this number is definitely weak compared to expectations.
That said, November's job figures were revised from 215,000 new jobs to 305,000 new jobs. That was the biggest increase since April 2004. U.S. job growth after Hurricane Katrina can be described as a bit of a roller coaster with these highs and lows.
The nation's unemployment rate dropped slightly to 4.9 percent. This decrease could be explained by people leaving the labor market because they were either discouraged while looking for work (slight increase) or because of other reasons such as family or school.
What does this mean? With December's numbers, which will most likely be revised in February, about 2 million jobs were created in 2005. On average, just more than 166,000 jobs were created each month. The economy needs to add 150,000 jobs to 200,000 jobs a month to keep up with new workers.
Economists at Bear Stearns believe December's numbers are inconsistent, as demonstrated by the sharp increase of November's jobs numbers. They think the number will be revised.
They are concerned, however, that as unemployment falls and wages rise, inflation could increase. So they expect the Federal Reserve to continue raising interest rates later this month to try to keep inflation under control.
Where did the jobs come from? December saw jobs created in manufacturing (18,000), food services and drinking places (36,000), health care (21,000), and financial services.
Employment was down in the retail industry as stores cut 16,000 jobs this holiday season. Construction also saw a drop of 9,000 jobs after a November increase of 252,000 jobs.
For the year, salaries for "nonsupervisory workers" on private payrolls increased 3.1 percent. According to Ian Shepherdson of High Frequency Economics, this is the fastest year-over-year growth in wages since February 2003. But it is less than inflation for 2005, which came in at 3.5 percent.
Shepherdson also points out that taking a two-month average of November and December, 206,000 jobs were created, close to the 200,000 average jobs created in June and August before Katrina hit.
How much does this matter? This is important. The jobs report is one of the most important economic indicators, and President Bush will probably highlight the 2 million jobs created this past year in his speech about the economy later today.
Definition: The nonfarm payrolls number is a measure of the number of new jobs created by the private sector during the month. It is based on a survey of about 160,000 businesses and government agencies. The national unemployment rate comes from a separate survey of households.
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