Powered by the strongest annual hiring in 15 years, employers added 252,000 jobs in December and pushed the unemployment rate down two ticks to 5.6 percent, the government said Friday.
Employers added approximately 2.952 million jobs for all of 2014. That was the best showing since 1999, and is consistent with third-quarter economic growth, which was revised up last month to a scorching annualized rate of 5 percent.
Adding to the solid showing, the government revised up October and November estimates by a combined 50,000, suggesting strong tailwinds as the economy entered 2015.
“Job growth is strong and broad-based, with no sign yet that the collapse in oil prices is having an impact on employment in the energy industry,” said Mark Zandi, chief economist for Moody’s Analytics. “The job market continues to tighten quickly given the strong job growth, but also because of continued weak labor force growth.”
That’s one of the downsides in an otherwise upbeat report. More people are working, but the labor force is not growing much, suggesting that many who lost their jobs during the Great Recession have exited the job market and have not returned.
Many are Baby Boomers who retired or are now semi-retired. Economists expect many to eventually return to the labor force, so the two-tenths of a percentage point drop in the jobless rate comes amid a smaller workforce.
Still, a falling unemployment rate is welcome. It “fell at the fastest pace in three decades,” said Jason Furman, head of the White House Council of Economic Advisers, adding in his blog that “job growth has picked up in sectors that traditionally provide good, middle-class jobs.”
Across sectors, the trend lines are good.
“Job growth could even kick in to a higher gear later this year as housing construction revs up, more than offsetting job losses in energy and perhaps in manufacturing due to weak global growth and a stronger U.S. dollar,” said Zandi. “At the current pace of job growth, the economy should be closing in on a 5 percent unemployment rate by this time next year, which is consistent with full employment.”
As hiring picks up steam, wages actually went in the other direction in December after beginning to rise in prior months. Average hourly earnings fell by two-tenths of a percentage point in December, and normally several solid months of hiring would put upward pressure on wages.
“Faster wage growth remains the missing piece of the puzzle, but with the unemployment rate declining further and 21 states raising their minimum wage starting this month, wages should accelerate as 2015 progresses,” said Stuart Hoffman, chief economist for PNC Financial Services.
The professional and business services sector, much of it higher-paying white-collar jobs, led all gainers with 52,000 new jobs in December. The construction sector posted a surprisingly strong 48,000 new jobs. The leisure and hospitality sector added 36,000 jobs, suggesting that Americans are loosening the purse strings again.
Manufacturing saw a slight uptick, with factories adding another 17,000 jobs.
“This continues to suggest that manufacturers are increasing their workforces at a decent rate, consistent with recent gains in demand and output” said Chad Moutray, chief economist for the National Association of Manufacturers. “However, manufacturers still face a number of challenges, ranging from slowing global growth to a still-cautious consumer to the prospect of increased interest rates.”
For the year, transportation equipment manufacturers led all others, adding 56,000 jobs in 2014, powered partly by the rise in transport of crude oil in railcars.
Retailers added 7,700 jobs in December, according to the Labor Department. That’s a soft number but retailers stand to benefit from stronger hiring more broadly as it puts more money in the hands of consumers.
“Today’s jobs report was very strong and shows that the labor market is maturing and the economy is performing soundly,” Jack Kleinhenz, chief economist of the National Retail Federation, said in a statement. “It is the largest annual increase in overall employment since 1999. While retail employment witnessed large swings in December, it was wholly consistent with seasonal patterns.”
DECEMBER BY THE NUMBERS:
_ Professional and business services, up 52,000.
_ Manufacturing, up 17,000.
_ Retail, up 7,700.
_ Leisure and hospitality up 36,000.
_ Health care, up 34,100.
_ Finance, up 10,000.
_ Construction, up 48,000.
_ Temporary help services, up 14,700.
_ Transportation and warehousing up 3,100.
_ Government, up 12,000.