December Employment Weaker Than Expected

The US Bureau of Labor Statistics released its monthly employment report last Friday.

I have been tracking the BLS employment data for many years and have been writing about it on Financial Slacker.

In prior articles, I discussed how one indicator of the health of an economy is the employment growth rate of that economy. When demand for products and services increases, companies hire employees to meet that growing demand. When the reverse happens, companies slow down their hiring and may even lay off employees.

And despite the record-setting performances of the markets over the last two months, employment is not showing positive signs.

 

December Employment Growth Continues Declining

For the month of December 2016, estimated non-seasonally adjusted total US private employment was 123.6 million, which is up 1.9 million, or 1.54% year-over-year from December 2015.

This is the first month we’ve added fewer than 2 million private sector jobs since May 2011.

Recall that we have been in a slow decline in employment growth since the peak in February 2015, when we added nearly 3 million jobs with a 2.6% growth rate.

But with that said, we are still in positive growth territory. It’s just that the growth continues to get smaller every month. At some point, if we follow history, we will start losing jobs as compared to the same month a year ago. It really does appear that we’re headed in that direction.

As the 30 year chart shows, we cannot maintain a sustained high growth level indefinitely. There will be a correction at some point. The question is how much of a correction, when will it start, and how long will it last?

 

What Is Happening In the Market?

Since November, the stock market has continued to rise setting new records along the way. But based on these employment numbers, the growth has less to do with strength in the economy and more to do with expected corporate tax cuts.

Also, many companies had projected 2017 earnings assuming a significant increase in minimum wage across the country. While some states did have higher minimum wage laws take effect on January 1st, we don’t expect a nationwide minimum wage increase to be mandated by the new administration. As such, investors are expecting earnings outperformance.

A little less certain is the impact the new administration will have on retaining and reversing the above jobs trends.

I’ll dig into these trends a little more, but for now, I am interested to hear back from readers with their thoughts.

 

Readers, what are you seeing in the employment market? If you have a job, is your company hiring, laying off, or maintaining? If you are unemployed, are you getting call backs and interviews?

 

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