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Brookings on Job Numbers

Impressive Job Gains Cap a Year of Steady Labor Market Improvement

Employers added 252,000 to their payrolls in December capping the best year for employment gains since 1999. Over the course of the year nonfarm employment climbed 249,000 a month, or 2.1% for the full year. This was the fastest pace of growth since the end of the 1990s economic boom. The rate of payroll gains in December was just slightly above the rate for the full year but below that for the previous three months. In the last four months of 2014, employer payrolls increased an average of 284,000 a month.

More than 95% of job gains in December and over the full year were in the private sector. Government agencies added just 12,000 to their payrolls in December and an average of 8,000 employees a month over the course of the year. Still, the turnaround in public employee payrolls accounted for about one-fifth of the increase in rate of payroll gains in 2014 compared with 2013. In 2013 the number of public employees fell 3,000 a month, the fifth successive year in which government payrolls shrank. State and local governments are now adding to their payrolls after a half decade of budget stringency.

October was the 58th consecutive month in which private companies added to payrolls. Disregarding monthly fluctuations, the annual growth rate in private payrolls has been remarkably stable during the past four years. Company payrolls increased between 2.1% and 2.5% a year over the period, with the fastest rate of gain occurring in the past year. Employment gains were broadly distributed across private industries, both in December and over the full year. In proportional terms, goods-producing industries expanded somewhat faster than service-producing industries in 2014. Construction added 48,000 to payrolls in December. Over the full year, construction employment increased almost 5%, by far its strongest performance since the recovery began in 2010. Nonetheless, construction payrolls remain more than 1.3 million (18%) below their level at the end of the 2002-2007 expansion. Manufacturing employment also continued to recover in December, although over the full year manufacturing payrolls grow more slowly than total nonfarm employment.

The BLS’s household survey also gave us a healthy dose of good news. Though the month-to-month employment changes are more erratic in that survey than in the Bureau’s employer survey, employment gains over the last four months of the year averaged 248,000 a month, a very healthy performance compared with job gains earlier in the recovery. Over the course of the full year, employment gains in the household survey averaged 231,000 a month, the best annual performance since 2006. The employment gains produced a sizable drop in unemployment. The number of adults reporting they are jobless and looking for work fell 141,000 a month in 2014, and the unemployment rate dropped to 5.6% — 1.1 percentage points below the rate in December 2013. Even more encouraging, much of the drop in unemployment has been among the long-term unemployed. In the 12 months through December, the number of unemployed in a jobless spell lasting more than 6 months fell almost 1.1 million, or 28%.

The latest jobs report contains two less encouraging statistics. The labor force participation rate—the percentage of adults who either work or are looking for work—continues to languish at a very low level. The participation rate edged down 0.2 percentage points in December, matching its low point over the past year. Many experts expect that a healthier job market will boost participation, but so far there is little sign of a rebound.


The latest report also shows scant improvement in the wages paid to active workers. The average hourly wage of all employees was $24.57 in December. That wage is 1.7% higher than average hourly pay in December 2013. The pace of wage gain is approximately the same as the change in consumer prices. If workers have experienced improvements in their real hourly pay it is mainly because consumer prices have slowed as a result of the unexpected drop in energy prices. It is not because the rate of nominal wage increase has accelerated over the course of the recovery. According to the latest employer survey, nominal wage gains were a bit slower in 2014 than they were in the previous three years. The worry that a lower jobless rate is a precursor to accelerating wage inflation seems almost comically premature.

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For more recent analysis by Brookings experts on how weather and seasonality have affected the latest jobs numbers, visit our page on adjusting the monthly jobs numbers.

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