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The U.S. economy continued its hiring pace as the U.S. Labor Department reported that 252,000 jobs were created in December, dropping the unemployment rate to 5.6%.

Inside the report the Labor Department analyzed that the unemployment rate declined by 0.2 percentage point to 5.6 percent in December, and the number of unemployed persons declined by 383,000 to 8.7 million. Over the year, the unemployment rate and the number of unemployed persons were down by 1.1percentage points and 1.7 million, respectively.

Two additional aspects of the report, first among the major working groups,  the unemployment rate for adult women (5.0 percent) decreased by 0.2 percentage point in December, while the rates for adult men (5.3percent), teenagers (16.8 percent), whites (4.8 percent), blacks (10.4 percent), and Hispanics (6.5 percent) showed little change. The jobless rate for Asians, at 4.2 percent (not seasonally adjusted), changed little from a year earlier.

The other part of the report is that the civilian labor force participation rate edged down by 0.2 percentage point to 62.7 percent in December. Since April, the participation rate has remained within a narrow range of 62.7 to 62.9 percent. In December, the employment-population ratio was 59.2 percent for the third consecutive month. However, the employment-population ratio is up by 0.6 percentage point over the year.

However the good news of the report it still showed that wages haven’t kept pace with the expanded hiring throughout the economy.

As the New York Times reported that job creation was tempered by a poor showing in average hourly earnings, which fell 0.2 percent in December after rising 0.4 percent in November. Many economists had thought the increase signaled the start of a trend that wages were finally improving.

“The job market is tightening, but it is not tight, at least not to the point that it is resulting in stronger wage growth,” said Mark Zandi, chief economist at Moody’s Analytics.

“At the current pace of job growth, the economy should be closing in on a 5 percent unemployment rate by this time next year, which is consistent with full employment,” he said. “Wage growth should also pick up more broadly in coming months.”

Diane Swonk, chief economist of Mesirow Financial, said the decline in wages came despite December job gains for construction and health care workers and other jobs that typically offered well-paying salaries.

 

“This is still a buyer’s market in terms of labor,” she said. “For all the good news on unemployment and the number of jobs we’ve created, if these wage numbers are to be believed, employers still have their pick.”

The next question, which still is an unknown with jobs being created when will the Federal Reserve begin to raise interest rates?

In the New York Times report, analysts offered varying views on what Friday’s report would mean about the potential for the Federal Reserve to raise interest rates. On one hand, job growth and the lowest unemployment rate since June 2008 offer evidence of a healthy economy, possibly convincing the Fed that it is time to raise rates. Yet wage growth is stalling, which might give the Fed pause.

“The economy clearly has no wage or price pressures that would point towards an early liftoff on interest rates,” said Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities, in a blog post.

Gad Levanon, director, macroeconomic and labor market research, the Conference Board, stated with regard to action by the Federal Reserve, “The economy generated 252,000 new jobs in December, and the gains for November and October were revised up. These strong gains are likely to continue to boost consumer spending in 2015. The continued drop in the unemployment rate, to 5.6 percent in December, puts us within striking distance of the natural rate of 5.5 percent.  All the more reason to expect that the Fed will start raising rates in the first half of 2015.”

As the economy begins to continue creating jobs one has to wonder what impact the implementation of Obamacare will have as the individual mandate and the employer mandate begin to take effect.

What impact will the U.S. Supreme Court decision in June regarding federal subsidies have on the economy if the court rules that element of Obamacare is unconstitutional and consumers who now get the subsidies which is about 80% lose them and have to pay the full cost of their healthcare?

We will get a better gauge after June’s Supreme Court decision.