Year Ends With Strong Jobs Growth But Economists Worry About Pay

Econ indices Dec 2014Capping the end of the strongest 12 months of U.S. job growth since well before the recession, employers added 252,000 jobs in December as the unemployment rate fell to 5.6 percent, its lowest level since June 2008.

Economists had expected a strong year-end jobs report from the U.S. Labor Department, but were predicting growth closer to about 240,000 jobs and only a slight change in November’s 5.8 percent unemployment rate.

“The economy has some momentum,” Robert Shapiro, chairman of Sonecon, an economic consultancy, told The New York Times before this morning’s report was released. “I think it’s kind of hit a stride with respect to job creation.”

Besides the strong December numbers, the U.S. Bureau of Labor Statistics, which compiles the data, adjusted up its previous counts for November and October, adding 50,000 more jobs than initially reported.

Tempering the positive news, however, was a decline in private non-farm hourly wages last month. The average fell 5 cents to $24.57, nearly wiping out November’s 6-cent-an-hour increase. That leaves the average pay increase at 1.7 percent for the year.

Private-sector production and non-supervisory employees decreased by 6 cents to $20.68 in December. The average was $20.35 a year ago.

Part of the explanation for the stagnant wage growth in the face of strong hiring is that many of the new jobs have been in low-wage industries. Restaurants and bars, an industry with many minimum-wage jobs, added 43,600 workers in December. That’s a net gain of 361,000 workers over the year.

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And while the number of unemployed workers declined by 1.7 million during the year, it doesn’t mean they all found jobs. Many have simply given up trying to find a job and are no longer included in the count. The Labor Department reported that the participation rate for December was 62.7, a near-historic low.

Economists are at a loss to entirely explain the decline. Retirements of baby boomers and a return to school by some younger workers accounts for only about half the decline.

For recruiters, it means a smaller worker pool from which to hire. While the global economy is showing signs of cooling, which could affect the pace of hiring in the U.S., for the month ahead recruiting will continue to be a challenge. The LINE report for January from the Society for Human Resource Management predicts manufacturers will increase their hiring. The service sector will decline slightly.

The Labor Department said manufacturers added 17,000 jobs in December; the overall goods producing sector grew by 67,000 jobs. The service sector accounted for 173,000 jobs and government added 12,000 workers, almost all at the state and local level.

John Zappe is the editor of and a contributing editor of John was a newspaper reporter and editor until his geek gene lead him to launch his first website in 1994. He developed and managed online newspaper employment sites and sold advertising services to recruiters and employers. Before joining ERE Media in 2006, John was a senior consultant and analyst with Advanced Interactive Media and previously was Vice President of Digital Media for the Los Angeles Newspaper Group.

Besides writing for ERE, John consults with staffing firms and employment agencies, providing content and managing their social media programs. He also works with organizations and businesses to assist with audience development and marketing. In his spare time  he can be found hiking in the California mountains or competing in canine agility and obedience competitions.

You can contact him here.


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