Labour market data have been solid in December, with low initial claims and an increase in the Markit PMI employment index.
We estimate non-farm payrolls increased by 170,000 in December in line with the recent trend and more or less in line with the consensus of 178,000. We estimate private services was the main contributor to job growth with 150,000 new jobs. After four months in decline, we estimate manufacturing employment was unchanged in December as manufacturing activity has recovered. Construction employment probably increased 8,000 in December.
We estimate the unemployment rate rose to 4.7% and that average hourly earnings increased 0.2% m/m, implying a small increase in the wage growth rate of 2.6% y/y. The November report showed that job growth increased by 178,000 and the unemployment rate fell to 4.6% – the lowest level post-crisis. However, the fall in unemployment rate was mainly due to a fall in the labour force. Since we expect this to be corrected we also expect the unemployment rate increased slightly in December.
Average hourly earnings declined in November – mostly due to falling wages among supervisory workers. The decline came after a strong increase in the previous month and is hence less of a concern. We do not think this is the beginning of a new trend and expect average hourly earnings rose in December. On average, job growth has been around 50,000 lower per month in 2016 compared to 2015. This is mainly due to the economic slowdown in the US from Q4 15 to Q2 16. As growth rebounded in H2 16 and is expected to continue growing slightly above 2% q/q AR, we expect employment growth to continue at the current pace in the coming months.
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