U.S. Payroll & Earnings Growth Firm in December; Unemployment Rate Is Unchanged

The labor market remains in good shape. Nonfarm payrolls increased 216,000 (1.9% y/y) after rising 173,000 in November, revised from 199,000, and 105,000 in October, revised from 150,000. During all of 2023, payrolls rose an average 225,000 per month after an average 399,000 in 2022. These gains compare favorably to the three years before the pandemic. The December increase contrasts to expectations for a 150,000 gain in the Action Economics Forecast Survey.

Average hourly earnings rose 0.4% in December after increasing an unrevised 0.4% in November and 0.3% in October, revised from 0.2%. The 4.1% y/y earnings increase remained below 4.8% in 2022 and a high of 5.9% y/y in March of that year. A 0.3% December increase had been expected.

The December unemployment rate of 3.7%, measured in the household survey, held steady with November’s level after declining from 3.8% in October. It remained the lowest rate since 3.5% in July. Expectations had been for an uptick to 3.8%. The unemployment rate averaged 3.6% last year, unchanged from its 2022 average. Household employment declined 683,000 after rising 586,000 in November. The labor force fell 676,000 following a 404,000 increase. The overall unemployment rate, including workers who were marginally attached & working part-time for economic reasons, rose to 7.1% last month from 7.0% in November. The rate has been trending higher since its 6.5% December 2022 low.

In the establishment survey, private-sector employment rose 164,000 (1.6% y/y) after increasing 136,000 in November, revised from 150,000, and 44,000 in October, revised from 85,000. Factory sector jobs rose 6,000 (0.2% y/y) after a 26,000 November gain. Construction sector employment rose 17,000 (3.0% y/y) after a 6,000 November increase. Mining & logging employment eased 1,000 (+2.2% y/y), the third consecutive monthly decline.

Private service-producing employment improved 142,000 (1.7% y/y) after rising 106,000 in November. Industry performance remained mixed. Trade, transportation & utilities employment held steady (+0.5% y/y) but leisure & hospitality payrolls rose 40,000 (3.2% y/y). Education & health care jobs added a lessened 74,000 (4.3% y/y) while professional & business jobs rose an improved 13,000 (0.5% y/y), including a 33,000 decline (-7.3% y/y) in temporary help employment. Financial sector employment improved 2,000 (0.4% y/y) and information sector payrolls rose a steady 14,000 (-2.2% y/y).

Government sector payrolls rose 52,000 (3.1% y/y) in December after a 37,000 November gain. Local government payrolls rose 37,000 (2.4% y/y) and state government jobs increased 8,000 (5.1% y/y). The number of federal government jobs rose 7,000 (2.8% y/y).

The 0.4% December gain in private-sector average hourly earnings reflected a 0.3% rise (5.4% y/y) in goods-producing earnings. Construction sector earnings edged 0.1% higher (4.6% y/y) and factory sector earnings strengthened 0.5% (5.7% y/y). Mining & logging sector earnings rose 0.5% (5.9% y/y). In the private services sector, earnings rose 0.5%. The 3.8% y/y increase remained well below its high of 6.1% in March 2022. Leisure & hospitality earnings increased 0.4% and 3.9% y/y, still well below the 14.0% y/y peak in December 2021. Information sector pay strengthened 0.8% (3.6% y/y). Financial activities earnings improved 0.4% (5.0% y/y). Trade, transportation & utilities sector pay rose 0.6% (4.5% y/y) last month. Professional & business sector earnings improved 0.5% (4.5% y/y) while private education and health services pay rose 0.3% (2.5% y/y).

The length of the average workweek eased to 34.3 hours in December and remained below a peak of 35.0 hours in January 2021. The workweek in the goods-producing sector slipped to 39.7 hours. The construction sector workweek fell to 39.1 hours, while the factory sector workweek eased to 39.8 hours. The mining & logging workweek rose to 45.5 hours, the longest in six months. The average workweek in the private service sector held steady at 33.3 hours for the tenth straight month but remained below the 34.0 hour high early in 2021. Financial sector hours have been unchanged at 37.4 hours this year but information services hours surged to 36.7 hours. Professional & business service hours slipped to 36.4 hours while private education & health services hours edged higher to 33.3. Leisure & hospitality hours improved slightly to 25.6 hours in December.

The private sector’s aggregate weekly hours index, a key indicator of production and income, slipped 0.2% (+1.2% y/y) in December and increased 0.8% (AR) in the fourth quarter following a 1.3% Q3 gain.

In the household survey, the steady 3.7% unemployment rate in December was accompanied by a lower 62.5% labor force participation rate, down from 62.8% in November. It was the lowest rate since February. The participation rate for teenagers fell to 37.0% from near a 14-year high of 37.5% in November. For workers aged 20-24, the rate eased to 71.3% and compared to a high of 72.0% in February & March of last year. For workers aged 25-54, the rate fell to 83.2% in December, off versus the high of 83.5% in September. It still was increased from 82.0% two years earlier. For individuals 55 and over, the rate fell to 38.4% in December and remained well below its 40.5% peak in July 2019.

The employment/population ratio for all workers fell to 60.1% from its three-year high of 60.4% in November. It also remained below its reading of 61.1% in February 2020, just prior to the pandemic.

The average duration of unemployment rose sharply to 22.3 weeks in December from 19.5 weeks in the prior month. It was the longest duration since August 2022. The median duration of unemployment rose increased to 9.7 weeks from 9.0 weeks in November. It was the longest since February 2022 but remained below the 20.3-week high in March 2021.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.