The nation is well on its way in one of the largest economic recoveries in modern history, new government data shows, but some workers are still lagging behind as President Obama prepares to hand the office to Donald Trump.
The U.S. economy added 156,000 new jobs in December, the Labor Department reported Friday, slightly below economists’ expectations. Yet wages rose 2.9 percent from last December, the strongest increase in more than seven years and evidence that economic growth is finally translating into gains for workers.
“The big surprise, and what we found really reassuring, is the bump up in hourly earnings,” said Beth Ann Bovino, chief U.S. economist at Standard & Poor's. “We’re starting to see signs that people are going to get more money in their paychecks.”
The data from the president’s final full month in office was in stark contrast with the economy in January 2009, as Obama took office amid the depths of the recession. At that time, the unemployment rate was 7.8 percent. Last month, the jobless rate rose slightly to 4.7 percent. The decrease marks the second-largest drop in the unemployment rate during a presidency, after President Bill Clinton, since Dwight D. Eisenhower took office in 1953.
December also marked the 75th straight month of job growth — the most extended streak the country has seen since 1939.
“I can’t imagine a bigger contrast between the economy that President Obama inherited and the economy that President Obama is about to hand off,” Secretary of Labor Thomas Perez said Friday. “The major piece of unfinished business in this recovery is to make sure the wind that’s hit our back results in shared prosperity for everyone, and not just prosperity for a few.”
Republicans had a more negative view. “While I welcome some of the bright spots in this report, it doesn't change the fact that 2016's job creation was the worst we've seen in years,” Rep. Kevin Brady (R-Tex.) said in a statement. “President-elect Trump has reignited the American people’s confidence in our economy because they understand that growing our economy is his first priority.”
Stock indexes rose throughout the day, with the Standard & Poor's 500 surpassing historic highs. The Dow Jones industrial average traded within 1 point of the record 20,000 mark. The dollar strengthened and the yield on U.S. Treasuries rose on signs that stronger economic growth would bolster the case for higher interest rates.
Economists surveyed by Bloomberg had expected American companies to add 180,000 jobs last month. Still, the number of new jobs added in December was far above what’s needed to keep up with population growth, economists said, and revisions to job figures for October and November added another 19,000 jobs to the rolls. Average hourly earnings increased by 10 cents from the previous month to $26 in December.
The number of new jobs added each month has gradually slowed as the economy recovers from the depths of the recession, from average monthly gains of 251,000 in 2014 to 229,000 in 2015 and 183,000 in 2016.
Trump has pledged to boost the U.S. economy by reducing regulations and corporate taxes, boosting infrastructure spending and reviving America’s manufacturing sector. But data suggest he is inheriting an economy that is relatively secure.
Workers are less likely to be stuck in part-time jobs and are confident enough in the market to quit their jobs when they want to. A broader gauge of underemployment that includes involuntary part-time workers and those who have stopped looking for work, called the U-6 rate, fell to 9.2 percent in December, the lowest reading since the financial crisis.
Still, some economists believe that the country hasn’t yet reached a full recovery. They caution that workers with less education and fewer skills continue to lag behind, as do some geographic regions, like the Midwest and South. Compared with before the recession, more workers are sitting out of the labor force entirely, not working and not looking for jobs. And the unemployment rate for African Americans and Hispanics remains above its pre-recession low, said Elise Gould, senior economist at the Economic Policy Institute.
“I think we could aim higher,” Gould said.
Jed Kolko, chief economist at job search site Indeed, said Trump will face two major challenges. One is “longer-term headwinds” in the labor market, such as automation and other technological changes that are eliminating jobs in the manufacturing and service sectors. But a second challenge will be continuing to improve on a relatively strong economy, Kolko said.
“It will be hard for any incoming administration to improve significantly on a 4.6 percent unemployment rate or monthly job growth that’s been averaging close to 200,000 jobs a month,” he said.
In December, the strongest growth came in the health-care sector, which added 43,000 jobs as new hospitals opened, the Affordable Care Act increased the ranks of the insured and America's aging population demanded more services, said Diane Swonk, a Chicago-based economist.
Manufacturing showed signs of rebounding in December, but the sector still shed jobs over the course of the year. The Alliance for American Manufacturing, a nonprofit that includes manufacturers and the steelworkers’ union, noted Friday that Obama still lags behind his goal of adding 1 million manufacturing job during his second term.
Retail employment remained soft, despite reports of a relatively strong holiday season. The transportation and warehousing sector, however, expanded significantly, suggesting that more consumers headed online to do their holiday shopping. “The shift away from brick-and-mortar stores contributed to the labor dynamics for the retail sector, and that is a story that has been ongoing for the past several years,” said Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch.
Signs of a strengthening economy persuaded the U.S. Federal Reserve to vote unanimously in December to raise its benchmark interest rate by a quarter of a percentage point, the first such increase in a year.
In its December meeting, Fed officials did not mention Trump by name, but they clearly discussed the potential economic impact of his impending presidency. Minutes of the meeting released in early January cited Fed officials as saying that they may need to lift rates faster in the future if changes in government spending cause inflation to rise by more than expected, likely referring to Trump's promise to boost infrastructure spending.
“We're operating under a cloud of uncertainty at the moment, and we have to wait and see what changes occur and factor those into our decision-making as we gain more clarity,” Fed Chair Janet Yellen said at a news conference.