PREVIEW: What to expect from the December jobs report - Yahoo Finance

The U.S. Department of Labor will deliver its December jobs report at 8:30 a.m. ET Friday.

The release is expected to cap off a strong year for the labor market, with the unemployment rate holding at a 50-year low and payrolls rising even as a temporary boost from November fades.

Here are the main results expected from the report, according to Bloomberg-compiled data as of Thursday afternoon:

• Change in non-farm payrolls: +160,000 expected, vs. +266,000 in November

• Unemployment rate: 3.5% expected, vs. 3.5% in November

• Average hourly earnings, month on month: +0.3% expected, vs. +0.2% in November

• Average hourly earnings, year on year: +3.1% expected, +3.1% in November

Payroll gains are poised to decrease in December after surging in November, when General Motors employees striking between September and October returned to work and pushed up results. But the end of the strike only accounted for a net 41,000 of November’s payroll gains – meaning underlying job growth was still well above the one-year trend even aside from the one-time effect.

“After slowing modestly in October, payrolls surged in November, and not just because of an unwinding of GM strike effects,” TD Securities analyst Jim O’Sullivan wrote in a note Thursday. “We expect slowing again in the December report, mainly because of payback for exaggerated strength.”

Other economic indicators also hinted at a strong December jobs report. The ADP/Moody’s employment report Wednesday showed private sector jobs rose by 202,000 in December, far exceeding consensus expectations for 160,000 and the prior month’s upwardly revised level of 124,000. Initial jobless claims fell to a five-week low during the last week of December, and the employment component Institute for Supply Management’s December non-manufacturing survey held firmly in expansionary territory.

The December jobs report is due for release at 8:30 a.m. ET Friday.

An in-line December jobs report would bring the 2019 average for non-farm payroll additions down slightly to about 178,000, or 49,000 below 2018’s average. Such a level, however, would remain well above the estimated 100,000 jobs needed to be created per month to keep pace with growth in the working-age population.

And continued labor market tightness has been most clearly evidenced in the unemployment rate, which ticked down to a 50-year low of 3.5% in November. Consensus economists believe December’s rate will hold at this level.

That said, low levels of unemployment have translated into only modest wage growth. After peaking at 3.4% year-on-year in February, wage gains decelerated throughout the rest of the year, and are anticipated to come in at 3.1% in December.

“According to the Federal Reserve’s Beige Book ‘the vast majority of Districts continued to note difficulty hiring driven by a lack of qualified applicants as the labor market remained very tight,’’ James Knightley, ING chief international economist, wrote in a note.

“One would assume this means that wages should be bid higher to compete for workers, yet we are not seeing it in the official data,” he said. “One argument is that companies are satisfying workers with improved benefit packages – medical, pensions, vacation days – and are being more restrictive on salaries. However, according to the employment cost index report, benefit growth is in fact underperforming wage and salary growth.”

Friday’s jobs report will also include revisions to household surveys over the past five years, which could impact previous results for the unemployment rate.

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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