167,000 New Payroll Jobs Added in December
Such job growth in the payroll survey is…well anemic when compared to historical numbers during an economic expansion. To bring it back in line with historical numbers we’d need to add at least another 100,000 jobs or even more. The number maybe revised upward as more data comes in, but it wont be enough to put the number of payroll jobs in line with historical norms. Still, many analysts are starting to see these kinds of numbers as good. Looking at the household survey we see that 303,000 new jobs were added.
James Hamilton suggests that the best approach is to combine both the nonfarm payroll esitmates (NFP) along with the household survey and another estimate from the Automatic Data Processing (ADP). He argues that each of the three series captures data that the other misses with the NFP series being the most reliable. For example, last month Prof. Hamilton’s weighted average (80% for the NFP and 10% for both the household survey and the ADP estimates) yeilded an estimate of 150,000 new jobs. Considering that the NFP was revised upwards from 132,00 to 154,000 Prof. Hamilton is probably onto something here. A similar calculation for December indicates that the the actual number of jobs added is 160,000 due to the fact that the ADP estimate was for a loss of 40,000 jobs.
Wages also increased last month by substantial amount, 0.5% and ended at $17.04 (on average) for the month. Both of these numbers were ahead of analysts predictions. Despite this good news the slowing economy has many predicting that unemployment will rise from its 6 year low to 4.9%. Add on that the Fed is going to be watching for inflation, and rising wages could contribute to an acceleration in the inflation rate, means that this isn’t simply just good news.