US companies increased payrolls by a strong 275,000 (seasonally adjusted) in December, according to this morning’s employment report from the Labor Department. The gain beat the consensus forecast by a wide margin and introduces a timely round of optimism after a bearish start for markets so far in the new year.
Today’s update reaffirms the case for anticipating that the US economy will continue to expand in the near term. In fact, that’s been the general message from a diversified set of macro indicators all along. As I noted in last month’s business-cycle review, “the manufacturing sector may be in recession, but the labor market still looks resilient.” Today’s release certainly strengthens that view.
Indeed, the three-month average for growth in private payrolls through last month is a robust 276,000—the strongest gain for that rolling time frame since January. Meantime, the year-over-year trend continues to print at a healthy pace—+2.15% through December. There’s still concern that the continued deceleration in the growth rate will create trouble down the road. But until/if we see the annual change slip under the 2.0% mark it’s premature to get worked up about the potential for weakness in payrolls.
“The remarkable thing is how consistent employment growth has been over the past three or four years,” notes Mark Zandi, chief economist at Moody’s Analytics. “We’re getting at least 200,000 jobs per month on a consistent basis. That’s quite an achievement.”
Michael Feroli, chief US economist at JPMorgan Chase, agrees. “This should calm some fears about the US economy losing growth momentum. It’s reassuring in the backdrop of some recent economic reports that were weak.”
There’s still plenty to worry about, particularly for the manufacturing sector and the global economy in general. But from a top-down US perspective, it’s going to take a lot of surprisingly bad economic news in the weeks to come to overshadow today’s renewed evidence that job growth remains solid.