Tepid Hiring, but Jobs Report Shows Sustained Wage Growth

The American economy added 156,000 jobs in December, capping the final full month of President Obama’s term on a tepid note, even as his successor, Donald J. Trump, promises that much bigger gains could be around the corner.

The unemployment rate edged up to 4.7 percent, according to the Labor Department report on Friday. That was up from a post-recession low of 4.6 percent in November.

But the bigger story in Friday’s report was a better-than-expected showing for hourly earnings, a missing link for many workers until recently in the recovery from the recession. Average hourly earnings rose 0.4 percent in December, bringing the 12-month increase to 2.9 percent, the best annual performance since the recovery began in mid-2009.

“With the unemployment rate down and the labor market tighter, you would expect to see wages move higher, and that’s what the data is showing,” said Michael Gapen, chief United States economist at Barclays. He expects wages to rise by 3.5 percent in 2017, which would be the biggest gain for pay in nearly a decade.

The size of the year’s gain also suggests the uptick in wages is not a fluke, but an outgrowth of a labor market in which employers have to pay more to hire and retain workers. A rise in the minimum wage in 19 states on Jan. 1 should provide an additional tailwind for salaries at the bottom end of the wage scale this year.

The Labor Department also revised the job gains in November and December upward by 19,000.

The average monthly pace of hiring in 2016 stood at 180,000, well below the 225,000 pace in 2015 and the 248,000 rate in 2014, which was the best showing since the Clinton-era boom of the late 1990s.

But with the unemployment rate now at 4.7 percent, instead of 8 percent four years ago, the slowdown is not a surprise. A considerable part of the earlier slack in the labor market has been absorbed, and labor costs are on the upswing.

Taken together, the last three years of job creation enabled Mr. Obama to finish strong after a sluggish start after the recession.

For all his criticism of Mr. Obama’s economic stewardship during the campaign, Mr. Trump inherits an economy that is fundamentally solid. Consumer sentiment, corporate profits and the stock market are all at or near multiyear highs.

While the monthly jobs reports is no longer grist for the campaign trail mill, as it was for most of last year, investors and traders are now closely watching the data for clues to when the Federal Reserve Board may next raise interest rates.

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Last month, the Fed increased interest rates for only the second time in a decade, and policy makers signaled that three more moves could come this year. Some economists think two increases are more likely, and that the Fed will take its cues in part from the labor market, as well as from fiscal policy under the new administration.

Diane Swonk, a veteran independent economist in Chicago, said the rising wages evident in December make it more likely the Fed would increase interest rates multiple times this year, rather than once as in 2016 and 2015. “This is a turning point for the overall economy,” she said.

To be sure, the economic worries that enabled Mr. Trump to capture the Rust Belt and in turn the White House persist: The future for Americans without a college degree or specialized skills is dim; millions of former workers are still on the sideline; and factory jobs are disappearing.

What is more, the Labor Department’s broadest measure of unemployment, known as the U-6, is almost twice as high as the headline 4.7 percent figure. It includes workers forced to take part-time jobs because full-time positions are not available, and at 9.2 percent, it underscores why many workers still feel frustrated with the recovery.

But Friday’s report, and the gains for all of 2016, underscore just how well many sectors are doing. Health care and education, finance, and professional and business services were especially strong last month.

Laggards included the mining sector and logging sector, which continues to struggle with low prices for commodities. While the retail sector as a whole saw employment edge up slightly to just over 16 million, general merchandise stores hemorrhaged 23,900 jobs. That is a sign of just how much brick-and-mortar stores are suffering in the age of the online retailer Amazon.

There was also softness in temporary help services, Mr. Gapen of Barclays noted, but the silver lining was a 17,000 increase in manufacturing employment. That was the first increase in factory hiring in five months.

Although it is not reflected in the December figures, many low-wage workers are receiving a raise this year because of state increases in the local minimum wage. Some of the increases were substantial, with Arizona, Maine and Washington each raising the floor by $1.50 or more an hour.

Even in California, where the wage gain is not as steep, rising 50 cents an hour, one in 10 workers has received a raise. And minimum-wage gains can have a spillover effect, pushing up pay for workers just above the bottom salary tier.

As on many issues, Mr. Trump has sent conflicting signals on this subject, suggesting at times during the campaign that state increases were justified, but warning in primary debates that wages were “too high.”

Many Republicans have previously opposed mandated minimum-wage increases, arguing that for every lift, more low-wage jobs are cut or left unfilled as employers struggle with having to pay more and still eke out a profit.

Among economists, the costs and benefits of rising minimum wages are the subject of considerable debate, and experts will be watching sectors like retail, restaurants and food service for signs of a dip in hiring, at least in the short term.