Unemployment ticked up only because of higher participation rate in the labor force.
Economists predicted we’d only see around 176,000 new jobs in December 2018, but the jobs report showed employers added 312,000 jobs instead.
2018 also went out with a bang by averaging 220,000 new jobs every month, which is the best average since 2015.
Unemployment rate went from 3.7% to 3.9%, but that’s because labor force participation increased to 63.1%:
Helping to explain the uptick in joblessness, the labor force participation rate rose to 63.1%, matching its highest level since 2014, from 62.9% in November. Participation has been low by historical standards in recent years as the U.S. population ages, but economists say rising wages and good job prospects may be pulling workers back into the labor force.
A broader measure of unemployment, which includes discouraged workers and those working part-time for economic reasons, remained stable at 7.6% in December.
The report also showed that those in their prime have returned to work:
The labor-force participation rate, that is, the share of the population that’s working or looking for work, has been little changed in recent years. Labor-force participation was higher than now during every single year from 1978 to 2012.
But among workers ages 25 to 54, when education and retirement keep fewer people out of the labor force, participation rates are much higher. These rates are now back to their highest readings since 2008.
However, the numbers show that unemployment among those without a high school diploma has gone up from 5.1% to 5.8% since July. Those with a college degree saw unemployment go down to 2.1% from 2.2%.
Wages for hourly and weekly increased by 11 cents to $27.48. The Wall Street Journal pointed out that this increase made December “the third straight month in which wages more than 3% from a year earlier.”
Despite the numbers, consumer confidence fell in December:
Even though confidence remains historically strong, the report suggested consumers were spooked by the recent rout in global equity markets, weak housing data, and the continuing concerns about the Trump administration’s trade actions this year. A gauge of the nation’s households assessment of the present economic situation fell slightly in December, as well as an index tracking expectations for the future.
“Expectations regarding job prospects and business conditions weakened, but still suggest that the economy will continue expanding at a solid pace in the short-term,” said Lynn Franco, the Conference Board’s director of economic indicators.
However, Ms. Franco also said the recent declines reflect increasing concern about economic growth moderating in the first half of 2019. This is largely in line with what analysts expect, as fiscal stimulus from the late-2017 tax cuts fade, and the Federal Reserve continues to tighten monetary policy. At its latest policy meeting, the Fed revised its 2019 gross domestic product growth forecast down to a 2.3% annual pace from 2.5%.
Despite the growth and decent numbers in 2018, economists predict a slow down in this new year “as the boost from last year’s tax cuts fades, higher borrowing costs weigh on businesses and consumers, and the Trump administration’s trade policies disrupt U.S. companies’ supply chains and business prospects abroad.” Our GDP hit 3% in 2018, but now experts predict 2019 will only get to 2.3%.
The Chinese market could also cause problems:
Tech giant Apple this week lowered its revenue forecast for the first time in more than 15 years due to ebbing iPhone sales in China. White House economic adviser Kevin Hassett said Thursday that other U.S. companies are likely to face growing difficulties in the Chinese market in the months ahead as the world’s second-largest economy slows amid trade negotiations.
The uncertainty has weighed heavily on financial markets. U.S. stocks in 2018 saw their worst yearly losses in a decade, with the Dow Jones Industrial Average closing Thursday almost 16% below its September peak.
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