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Job growth surges, unemployment ticks up. Why?

08 January 2019

In fact, USA businesses created more jobs in December than any other month since President Donald Trump took office.

There are concerns that tightening financial market conditions because of the steep stock market sell-off could hurt hiring.

The blockbuster USA jobs numbers starkly contrasted with the mounting fears for the global economy of recent weeks - which have seen stock prices tumble and confidence wane among corporations who foresee slowing demand and weakening sales in 2019.

In recent weeks, financial markets have plunged amid concerns that the USA could be in a recession by 2020.

"Friday's payrolls numbers suggest a healthier United States economy than some investors had anticipated", it said.

Job gains were spread across a variety of industries with construction and manufacturing each posting gains of more than 30,000 jobs.

If monthly job gains start shrinking in 2019, people shouldn't panic, Gimbel said. Revisions to the October and November estimates added an additional 58,000 jobs to the 2018 total.

And although the unemployment rate rose slightly, wage growth increased 3.2 percent from the previous December. Fewer workers worked part-time for economic reasons in December.

Optimism over hiring prospects caused the participation rate in December to climb to 63.1% from 62.9% the month previously (i.e., more out-of-work individuals chose to rejoin the labor force). Powell said the US central bank was "always prepared to shift the stance of policy and to shift it significantly" if necessary.

Powell stressed at a panel in Atlanta on Friday that he would not resign if the president asked him to do so.

The average monthly increase in USA construction jobs in 2018 was +23,000, which was +12.0% higher than 2017's average monthly increase of +21,000.

A year earlier, the jobless rate was 4.1 per cent and the number of unemployed persons was 6.6 million, as against 6.3 million in 2018.

USA financial markets are projecting no rate hikes in 2019. That boosted job gains to an average 254,000 per month over the last three months.

Stocks headed higher following the report.

The Bureau of Labor Statistics said that the oil and gas extraction sector increased employment by 300 jobs to 154,700 positions.

The report did not include the impact of about 380,000 federal workers who were furloughed in December because of the government shutdown.

"People should not get used to numbers like the one we saw this month", said Martha Gimbel, director of economic research at the jobs site Indeed. Wage growth also performed well in December, rising 0.4% as year-over-year growth climbed to 3.2%.

"Strong job gains coupled with rising wages should act as a tailwind for consumption", said Michelle Meyer, chief economist at Bank of America Merrill Lynch in NY.

Growth forecasts for the fourth quarter are around a 2.6 percent annualized rate, with risks tilted to the downside amid fading stimulus from the Trump administration's $1.5 trillion tax cut package, a trade war with China and policy uncertainty in Washington. The comparable increases across the whole economy, both hourly and weekly, were +3.2%.

Slow income growth has been the most persistent problem afflicting the USA economy in its recovery from the Great Recession.Wages have barely kept up with the cost of living, even as the unemployment rate dropped and the economy expanded. That's a tiny bump, and reflects more of the slow wage growth that has plagued the economy in recent years. The government shutdown, if it extends beyond next week, could weigh on January payrolls.

Hiring jumped in healthcare, bars and restaurants, construction and, notably in manufacturing, especially for durable goods, fabricated metal products and computers and electronics - all sectors that complain of lower profits and lost sales due to global trade tensions. Workers who have struggled with disproportionately high joblessness found more opportunities.

Professional and business services employment increased by 43,000 jobs last month and government payrolls rose 11,000. Employment in the leisure and hospitality sector increased by 55,000 jobs. Education added 24,000 jobs.

Job growth surges, unemployment ticks up. Why?