No More 10 Minute Breaks: Five Things to Watch in the December Jobs Report

The Labor Department will publish its December jobs report Friday. With the flow of data from other agencies suspended amid the government shutdown, the monthly snapshot of the labor market could provide key insights into the real economy at a time of volatility in financial markets. Here are five things to look for in the report.

1. Hiring

This is the number that could either ease or exacerbate fears among market participants of a recession in 2019. Economists expect employers likely added 220,000 workers to payrolls in December, which would indicate hiring remained very strong at the end of the year despite worries about global growth, trade and interest rates. (One caveat to any number: The data won’t reflect any impact from the government shutdown, which started after the Labor Department conducted the survey. ) If nonfarm payrolls increase by fewer than 150,000, it could reinforce slowdown concerns, said Josh Wright, chief economist at iCIMS Inc.

2. Wage Growth

Average hourly earnings are expected to rise 0.3% in December from November and 3% from a year earlier. While that would mark the strongest full-year wage growth since 2008, it’s only modestly outpacing inflation. As a result, Fed Chairman Jerome Powell has said the central bank would welcome further pay raises. But if wage growth deviates significantly from the forecast in either direction, it could raise a red flag for policy makers.

3. Unemployment Rate

Economists estimate the unemployment rate fell to 3.6% in December from 3.7% in November. Joblessness hasn’t been that low since hitting 3.5% in December 1969, when the Vietnam War was near its peak. The unemployment rate is also expected to come in a tenth of a percentage point below Fed officials’ median estimate for the end of 2018. That would likely underscore some policy makers’ view that additional rate increases are needed to stave off inflation next year, particularly if a lower unemployment rate is accompanied by strong wage growth.

4. Sensitive Sectors

While most of the U.S. economy is humming along, two sectors are vulnerable to recent developments in global markets. One is the oil industry, which boomed for most of 2018 but may have suffered from falling prices toward the end of the year. The other is manufacturing, which may have lost some of its competitive edge as the U.S. dollar strengthened against foreign currencies. Falling employment in either of these industries would indicate that the risks are becoming a reality.

5. Part-Time Employment

Volatile and highly cyclical, involuntary part-time employment often ticks up before the broader unemployment rate when the economy starts to head south. The number of people working part-time because they couldn’t either secure enough hours at their job or find a full-time gig fell to 4.4 million this past August from 9.2 million in 2010. But it has picked up since then, hitting 4.8 million in November. If involuntary part-time employment continues to rise, economists say it could signal emerging weakness in the labor market.

Teachers Quit Jobs at Highest Rate on Record (Dec. 28)

Workers’ Pay, Not Just Benefits, Rises in Tight Labor Market (Dec. 14)

When Has U.S. Unemployment Typically Been This Low? Wartime (Oct. 5)

from Real Time Economics https://on.wsj.com/2F5025W