In the final month of 2019, the labor market remained strong holding it’s unemployment rate at historic lows despite seeing a decrease in total number of jobs compared to December 2018. According to last months job reports data, Bruce Steinberg finds that the threat of recession in the near future has been downgraded, please refer to charts and explanations provided in the report.
The December Employment report has detailed updates on job trends in all sectors. Send it to your staffing colleagues to keep your team up to date:
December 2019 Employment Report
The unemployment rate was 3.5 percent in December 2019, the lowest it has been since, well, December 1969. The number of employed persons increased, the number of unemployed persons decreased, and the size of the labor force increased…see the Household Survey section below for more details and explanations.
The total number of jobs increased 145,000, which is a disappointment from the 256,000 increase in November (however, the November number was affected by about 50,000 GM workers who returned from a strike); a year ago in December 2018, overall jobs increased by 227,000.
Overall private-sector hourly wages were up only 0.11 percent in December, or three cents, from November and up 2.87 percent, or 79 cents, from December 2018; both gains in hourly wages are slightly lower than recent trends.
And Temporary help services rose in December and October’s figure, which was revised as an increase last month was revised to a decrease.
Private-sector jobs were up 139,000 in December, which was below November’s gain of 243,000. As discussed above, the November figure was artificially high because of striking GM workers returning to work who were not included in the October data.
The private Goods-producing sector was down 1,000 in December compared to a gain of 52,000 in November and a decline of 29,000 in October.
Manufacturing was down 12,000 in December compared to a reported a gain of 58,000 in November.
The Construction sector was able to nail together 20,000 more jobs after adding 2,000 in November; a year ago in December 2018, it added 16,000 jobs.
Mining and logging was down 9,000 in December after losing 8,000 in November; a year ago in December 2018, it was up 4,000.
The private Service-providing sector increased by 140,000 jobs in December, which was less than the 191,000 it gained in November; a year ago in December 2018, it increased by 184,000.
The Retail trade sector’s performance added on an astonishing 41,200 jobs in December after declining by 14,200 in November; a year ago in December 2018, it declined by 5,900 jobs.
The Wholesale trade sector was up 8,300 jobs in December after declining by 2,500 in November; a year ago in December 2018, it was up 12,500 jobs.
The Transportation and warehousing sector shifted into reverse with a decline of 10,400 in December after adding 11,900 in November; a year ago in December 2018, it declined by 1,100.
Financial activities added 6,000 jobs in December and that was less than the 14,000 it added in November; a year ago in December 2018, it increased by only 1,000 jobs.
The Professional and business services sector experienced growth of only 10,000 in December and that was less than the 53,000 it gained in November; a year ago in December 2018, it was up 37,000. Computer systems design and related services was essentially flat with an increase of only 700 jobs in December after adding 9,500 in November. Management and technical consulting services was up 1,700 in December and that was better than the 800 increase observed in November. Architectural and engineering services was up 3,100 in December which was weaker than the 7,100 increase in November.
The Education and health services sector added 36,000 jobs in December that was only half the increase of 72,000 of November. Hiring in home health care services continued by adding 3,900 in December, which was less than the 8,400 increase in November.
The Leisure and hospitality sector added 40,000 jobs in December that followed a gain of 38,000 in November; a year ago in December 2018, it was up 65,000.
The total number of Government jobs was up 6,000 in December. The federal government was flat, state government down 8,000, and local government added 14,000.
Temporary Help Services Roundup
The number of temporary help jobs in December was 3,043,300 and that works out to a 6,400 gain and a 0.2 percent increase from November but a 0.5 percent year-over-year decline. Interestingly, October was initially reported as a decline, then revised to an increase last month, and now is being reported as a decline again.
For a chart of temporary help’s growth from January 1991 to December 2019 and comparing its trend to total employment, click here.
Although monthly data will not be finalized until next month, below is the annual change for temporary help services from 2000 to 2019 based on the preliminary information.
Based on currently published information, which will be revised next month with the publication of the January 2020 data, temporary help services was able to eke out a positive performance for 2019 on an annual basis by expanding 0.7 percent compared to an increase of 2.5 percent in 2018 from 2017.
In December 2019 temporary help services regained a some market share of all jobs to 1.9971 percent but is still well below a year ago in December 2018, when it was 2.0361 percent, and two years ago in December 2017, when it was 2.0167 percent.
The unemployment rate remained at a 50-year low at 3.5 percent in December, mainly due to the labor force growing slower than people are getting hired.
The number of employed persons increased by 267,000 as the number of unemployed persons declined by 58,000 at the same time the size of the entire labor force increased by only 209,000. And, there were 48,000 fewer people considered as not in the labor force in December. In other words, although the size of the entire labor force increased by less than the increase in the number of employed persons and the number of unemployed persons declined at the same time, the changes were not of sufficient magnitude to change the overall unemployment rate.
The labor force participation rate was unchanged at 63.2 percent in December and the employment-to-population ratio was also unchanged at 61.0 percent from the previous month.
Time to Change Thinking About A Recession?
If you are not a recent subscriber, you know that we have been talking about the risk of a recession developing in the near-term future. But, it appears that the risk of a recession — at least in 2020 — has been downgraded and no longer an imminent threat, or is it?
One of the better leading indicators for a recession is an interest rate inversion which is when short-term interest rates are higher than long-term rates. We first discussed this in April 2018 before an inversion actually occurred, but interest rates seemed to be heading in that direction. Then in March 2019 an inversion started between three-month and the ten-year treasuries, but not with the two-year treasuries. And then a few months later in August 2019, a very brief inversion occurred with the two-year treasuries as well.
In 2019 the Federal Reserve Board — possibly because they felt the risk of a recession was increasing — stopped raising interest rates and then started to lower them. Recession averted? Maybe.
As the chart for the ten-year and the three-month treasuries shows, an inversion started in late March 2019 and lasted more than six months before eventually ending in early October 2019 and reached its low point on August 28, 2019.
The inversion for the two-year treasuries performed fairly similarly, but occurred only for three days in late August and reached its low point on August 27, 2019, but was barely an inversion by historical standards.
There currently are no clear and strong headwinds that will cause the economy to reverse direction and descend into an endogenous recession. An endogenous recession is the result of the economy’s own making. The Great Recession of 2007-2009 is an example when consumers over-borrowed and over-invested in housing and the real estate market collapsed, bringing the rest of the economy with it.
There are also exogenous recessions, which is when some outside force or forces knock the economy down with a body-blow. The multiple oil crises of the 1970s are good examples as well as current international trade and tariff issues and the current Middle East situation.
By most accounts and indicators, the economy is expected to continue to grow and a recession in 2020 is unlikely at this time but if one occurs, it is expected to be mild. The consensus estimate for GDP growth will be slower than in 2019 and dip below 2 percent in 2020, absence of traditional “election year pump-priming” or other currently unforeseen geo-political developments.