December employment numbers show solid growth; 2014 was the best year for jobs since 1999

From the Bureau of Labor Statistics today:

Total nonfarm payroll employment rose by 252,000 in December, and the unemployment rate declined to 5.6 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, construction, food services and drinking places, health care, and manufacturing.

The monthly employment report was filled with good — or at least solid — news, but not necessarily in terms of wages.

From Bill McBride/Calculated Risk, one of the most sober and objective analysts out there — Employment Report Comments: First come the jobs, then comes the real wage growth:

2014 was the best year for total employment since 1999, and the best year for private employment since 1997. Awesome news.

Looking forward, hopefully 2015 will be about “wages”. My thinking is first come the jobs, then comes the real wage growth.

Overall this was a strong employment report with 252,000 jobs added, and job gains for October and November were revised up. A few other positives: U-6 declined to 11.2% (an alternative measure for labor underutilization) and was at the lowest level since 2008, the number of part time workers for economic reasons declined (lowest since October 2008), and the number of long term unemployed declined to the lowest level since January 2009.

Unfortunately there was disappointing news on wage growth, from the BLS: “In December, average hourly earnings for all employees on private nonfarm payrolls decreased by 5 cents to $24.57, following an increase of 6 cents in November. Over the year, average hourly earnings have risen by 1.7 percent.” But wages will hopefully be a 2015 story.

A couple of graphs from the BLS:

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And check out this graph via Calculated Risk:

EmployPop2554Dec2014 (1)

You’ll hear lots of commentary bemoaning the “collapse” — or some other hyperbolic word — of the labor force participation rate, but among prime working age Americans the rate has declined by only a few percentage points since the late 1990s. Some of those people left the labor force during the recessions, which is bad news, and we know there are more people on permanent disability, especially in some economically weak areas. But the decline in the participation rate has been very slight, and some of those people have retired early, quit working by choice, returned to college, or left the labor force for other reasons that don’t have anything to do with a weak economy. When you see much more extreme numbers about the labor force participation rate, you are likely looking at analysts’ work that makes the changes seem far more extreme than they are — they are including all adults but not adjusting for the aging of the baby boom generation, they are including all young adults but not adjusting for increased enrollments over the years in post-secondary education, etc.

We still have a ways to go to overcome the pernicious effects of the deep 2007 to 2009 recession, but things are looking better every month.