U.S. employers downshifted on hiring in December, adding 145,000 jobs as consumer spending appeared to aid gains in the retail and hospitality sectors in what should provide a strong foundation for 2020.
The Labor Department said Friday that the unemployment rate held at 3.5% for the second straight month, prolonging a half-century low. Hiring slipped after robust gains of 256,000 in November there were caused in part by the one-off end of a strike at General Motors.
“We’re starting 2020 in very good shape,” said Gus Faucher, chief economist at PNC Financial Services. “We should see continued economic expansion throughout 2020 driven by consumers.”
Still, the job growth has failed so far to put upward pressure on hourly pay. The pace of annual average wage growth slowed in December to 2.9% from 3.3% a year ago, a possible sign that there is still room for additional job gains despite the decade-plus expansion that has reduced the number of unemployed Americans. There is also the potential that wages jumped in January as many states adjusted their minimum wages.
Some businesses in competitive industries are already taking steps to prepare for wage competition this year. The Big Blue Swim School based in Chicago vies with day cares, learning centers and gyms for its instructors. The chain has five sites employing on average 30 people and plans to open five more schools this year and 17 in 2021. But it had to dramatically boost wages in order to attract staff for that expansion.
“We gave all of our front-line employees a 10% or 11% raise because of the fear we have about the wage pressures in the economy,” said CEO Chris Kenny. “We can’t meet our business goal without great staff.”
The U.S. economy added 2.1 million jobs last year, down from gains of nearly 2.7 million in 2018. Hiring may have slowed because the number of unemployed people seeking work has fallen by 540,000 people over the past year to 5.75 million. With fewer unemployed people hunting for jobs, there is a potential limit on job gains.
The steady hiring growth during the expansion has contributed to gains in consumer spending. Retail sales during the crucial holiday shopping improved 3.4% compared to the prior year, according to Mastercard SpendingPulse. This likely contributed to a surge of hiring in retail as that sector added 41,200 jobs in December.
The leisure and hospitality sector — which includes restaurants and hotels — added another 40,000 jobs. Health care and social assistance accounted 33,900 new jobs.
Still, the report suggests a lingering weakness in manufacturing.
Factories shed 12,000 jobs in December, after the end of the GM strike produced gains of 58,000 in November. Manufacturing companies added just 46,000 jobs in all of 2019.
Manufacturing struggled last year because of trade tensions between the United States and China coupled with slower global economic growth. Safety problems at Boeing have also hurt orders for aircraft and parts.