LOTS OF JOBS: The U.S. economy added 312,000 new jobs in December, a surprise to the upside for sure. In addition, the Bureau of Labor Statistics revised its October and November numbers reporting that there were 58,000 more jobs created in those months than earlier reported. In addition, wage growth was higher than expected. Average hourly earnings rose 11 cents to $27.48. Over the year, average hourly earnings have increased 3.2%.
BUT THE UNEMPLOYMENT RATE INCREASED: Despite over 300,000 new jobs in the economy, the unemployment rate increased to 3.9%. That is because about 400,000 people rejoined the labor force in December looking for jobs. The Labor Force Participation Rate increased to 63.1%. As you can see, that ratio decreased dramatically after the Great Recession, and has been moving mostly sideways since about 2014 with no clear trend.
ONE MORE THING ABOUT THE LABOR MARKET: Much of the falling Labor Force Participation Rate can be attributed to demographic shifts including an aging population and younger people staying in school longer. Therefore, the Labor Force Participation Rate for those aged 25-54 can be enlightening as to the health of the labor market. It has been trending upward since about 2016, which is good news indeed.
MARKETS RISE: On Friday, U.S. markets launched ahead, erasing the prior day’s losses, and getting 2019 off to a positive start. The surprisingly solid jobs report was a major catalyst. It also helped that the Fed Chair Jerome Powell said that the central bank is “prepared to adjust policy quickly and flexibly” if necessary.
BUT 2018 ENDED WITH NEGATIVE RESULTS: The fourth quarter doomed the markets with poor performance in October and December. Here are the results from some of the major indices for the year:
S&P 500 -4.38%
Dow Jones -3.48%
NASDAQ Composite -2.84%
MSCI EAFE (Developed Overseas Markets) -13.79%
MSCI EM (Emerging Markets) -14.51%
Barclays Global Aggregate Bond Index -1.20%
Barclays US Aggregate Bond Index +0.01%
HFRX Global Hedge Fund Index -6.72%
A TALE OF TWO YEARS: 2018 was having a more volatile, but solid year, until the last quarter. About two thirds of the way into the year, 2017 and 2018 were nearly identical.