Employers add 156,000 jobs in Dec., wage gains hit 7-year high

Employers added a modest 156,000 jobs in December but wage growth hit a seven-year high as President Barack Obama hands his successor, Donald Trump, a slowing but solid labor market that holds the promise of bigger paychecks for Americans.

The unemployment rate, which is calculated from a different survey, rose to 4.7% from 4.6%, as nearly 200,000 Americans entered the labor force, which includes those working and looking for jobs, the Labor Department said Friday.

Economists surveyed by Bloomberg expected 180,000 job gains.

Average hourly wages increased in December after dipping in November, rising 10 cents to $26 and they’re up 2.9% annually, the most since June 2009. Pay gains are expected to accelerate as the low unemployment rate forces employers to bid up to attract a more limited pool of workers.

"With wage growth climbing again, the modest drop-off in employment growth won't stop the Fed from (raising interest rates) again this year," economist Paul Ashworth of Capital Economics wrote in a note to clients. The Fed raised its benchmark interest rate last month for the first time in a year.

Businesses added 144,000 jobs, led by health care. Federal, state and local governments added 12,000.

Job gains for October and November were revised up by a total 19,000. October’s was revised down to 135,000 from 142,000, and November’s to 204,000 from 178,000.

Also encouraging is that a broader measure of joblessness that includes part-time workers who prefer full-time jobs and discouraged Americans on the sidelines, as well as the unemployed, fell to 9.2% from 9.3%.

A possible concern is that the number of temporary workers fell by 16,000. Employers typically hire contingent workers before adding permanent staffers and that group is also the first to be cut. But the drop only partly offset a 24,000 increase in temps in November.

Overall, job growth slowed last year to an average monthly pace of 180,000 from 229,000 in 2015. Many economists point to a low unemployment that’s supplying firms with fewer job candidates.

“There aren’t enough people to hire,” says economist Joel Naroff of Naroff Economic Advisors. He expects 170,000 average monthly payroll additions this year.

Some analysts said cold weather was likely to temper employment gains in December, particularly in industries such as construction. About 140,000 people didn't come to work last month because of bad weather, more than the 97,000 that's typical for December, notes economist Jim O'Sullivan of High Frequency Economics. "We believe the slowing in payrolls was largely due to weather effects," O'Sullivan said in a research note.

At the same time, Goldman Sachs cited some risk of a continued bounce-back from Hurricane Matthew, which suppressed job gains in the southern U.S. in October, particularly in retail, construction and leisure and hospitality. The research firm said the rebound from the storm was “fairly lackluster” in November, leaving room for further gains last month.

ADP: Businesses added 153,000 jobs in December

And online holiday shopping could have swelled transportation and warehousing payrolls in December as companies beefed up staffing at distribution centers. Payrolls in that sector increased by a solid 15,000.

Health care, meanwhile, added 63,000 jobs; leisure and hospitality, 24,000; and professional and business services, 15,000. Manufacturers added 17,000 jobs after cutting payrolls for several months, possibly indicating the sector is turning around as rising oil prices lift crude producers and spur more orders for steel pipes and other equipment.

Retailers added just 6,000 jobs in another sign that holiday shopping continues to shift online.

Election-related uncertainty likely reduced or delayed some hiring last year, possibly leading to an acceleration in coming months, Goldman says. Some businesses held off until a clearer picture of tax and regulatory policy emerges.

Other labor market indicators have been mixed. Payroll processor ADP said this week that businesses added a disappointing 153,000 jobs in December. And a measure of service sector employment showed smaller gains last month.

Yet more people continue to see jobs as plentiful, according to the Conference Board’s monthly survey.