Job report signals solid US economy

Bloomberg

The US job market delivered a blowout performance in December, giving a clearer signal that the economy is on solid footing even as investors fret about the trade war and other risks in 2019.
US stocks and Treasury yields surged after Labor Department figures showed employers added the most workers in 10 months, wage gains accelerated and labour-force participation jumped. Contrast that with the drumbeat of bad news in recent days, highlighted by the plunge in a closely-watched gauge of manufacturing and several big companies warning of slower revenue.
Across-the-board strength in the job market — the linchpin of the recent spurt in economic growth — will support further gains in consumer spending, the biggest part of the economy. That’s key, at a time the tariff war with China has cast a shadow over US manufacturing and the global outlook, one reason why investors were betting before the numbers that the Federal Reserve would stay on hold or cut interest rates, rather than keep raising them.
“The labour market is as strong as it’s been since pre-crisis times,” said Michael Gapen, chief US economist at Barclays Plc.
“The basic fundamentals of the economy are still solid. Therefore markets should expect the Fed’s policy rate to still go higher. How many more times, and when, is debatable, but this is not a report that tells the Fed they should just be on pause forever.”
Nonfarm payrolls increased by 312,000 in December, easily topping all forecasts, after an upwardly revised 176,000 November gain. Average hourly earnings rose 3.2 percent from a year earlier, topping projections and matching the fastest pace since 2009. Meanwhile, the jobless rate rose from an almost five-decade low to 3.9 percent, reflecting more people actively seeking work.
Still, economists say it’ll be hard to replicate such employment gains in 2019, as they expect gross domestic product growth will moderate amid the trade war and a fading boost from the Trump administration’s tax cuts. A shortage of skilled workers, softening manufacturing activity, a housing slowdown and a projected cooling in global growth also are headwinds.