Jobs Day Guide: Focus on Wage Levels Along With U.S. Payrolls

Here’s what to look for when the Labor Department releases the U.S. payrolls report for December at 8:30 a.m. on Friday in Washington.

• The Topline: Last year was a doozy for the American worker. The median forecast of 98 economists surveyed by Bloomberg calls for a 240,000 increase in December payrolls. While smaller than a month earlier, it would put employment gains for 2014 at almost 3 million, the most in 15 years. In November, the economy created 321,000 jobs, the biggest advance since January 2012, with gains across a broad swath of industries.

“Job growth is clearly still very strong,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The labor market will continue to improve. 2015 will be better than last year.”

Consistency has been the watchword for the labor market. December would be the 11th straight month in which at least 200,000 jobs were added. That last happened during a stretch that ended in March 1995.

The unemployment rate, derived from a survey of households rather than establishments, is projected to keep dropping. The median forecast calls for 5.7 percent in December, the lowest since June 2008, and down from 5.8 percent a month earlier.

For Federal Reserve policy makers, unemployment is quickly approaching the 5.2 percent to 5.5 percent range they associate with full employment.

“The unemployment rate is going to precipitously fall this year,” said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York. “ We’re adding jobs significantly above potential.”

Such progress in reducing the unemployment rate is “a recipe to build wage pressures,” he said.

• Paychecks: Faster job growth is good news for Americans, bigger paychecks are even better. Average hourly earnings are projected to climb 2.2 percent in the 12 months ended in December, the most since November 2013.

“People will be watching the wage numbers very closely,” said Thomas Costerg, an economist at Standard Chartered Bank in New York. “It’s the missing piece. We need to get strong payrolls growth and strong wage growth, otherwise people may look at it as a glass half-empty.”

Hourly earnings unexpectedly jumped 0.4 percent in November, the biggest gain since June 2013, the Labor Department reported last month.

“What I’m going to be really interested in is wage inflation,” said Eric Green, head of U.S. rates and economic research at TD Securities USA LLC in New York. “If we can build on that number and lead into another good number, then I think that should be good corroborating evidence in the hourly earnings data that we’re getting elsewhere that wage inflation is looking much stronger now.”

• Oil Patch: For years, domestic oil production has been a source of job creation. Companies raced to oil fields in Texas and North Dakota, putting pipes in the ground as prices averaged around $95 a barrel from 2011 through the middle of last year. Then, a combination of increased supply and slower global growth caused prices to plunge.

Michael Gapen at Barclays Plc is among economists who will be scanning the jobs report to see how the 50 percent slump in oil during the last half of 2014 is influencing hiring decisions. While that’s bad news for the oil patch, transportation companies and retailers are among those that stand to gain.

“We don’t think that lower oil will significantly alter the labor market and GDP backdrop in the U.S., but we obviously need to see that play out,” the Barclays chief U.S. economist said. “Oil started falling in June and it takes firms some time to respond, so it’s one component that we’ve been watching.”

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