Economists expected more jobs from the U.S. economy than the 156,000 that the government reported for December, but when you go inside the numbers you can see a separate but important trend emerging — working Americans are starting to see pay increases.
The Department of Labor said Friday that average hourly earnings rose 2.9 percent last year.
The New York Times noted that slim gains in take-home pay had made workers anxious and frustrated, and their discontent helped Republican Donald Trump capture the presidency in the November election.
The Times said the hourly earnings increase marked the economy’s best annual performance since the country began to recover from the Great Recession.
“This is a turning point for the overall economy,” Diane Swonk, an independent economist in Chicago, told the Times, adding, “Strong economic growth doesn’t really matter if it’s not widely distributed. You can have a better economy, but still not good enough for people who aren’t participating at all.”
Reuters said the pace of job gains the government reported in December was more than enough to absorb people newly entering the job market.
“With wages on the rise and payrolls solid, the Fed is no doubt taking a healthy celebratory lap, feeling confident after [Friday’s] report in their decision to hike in December, and cautiously optimistic as they look out to the new year," Lindsey Piegza, chief economist at Stifel Fixed Income in Chicago, told Reuters.
Reuters said the economy created 2.16 million jobs last year and 11.3 million during President Obama’s term in office.
"The report, the last one for the Obama administration, cements the president's legacy of helping bring the country out of the Great Recession," Robert Murphy, an economics professor at Boston College, told Reuters.
President-elect Trump has said he wants to increase spending on the country’s infrastructure — a policy that figures to help keep the economy growing if he can persuade the Republican-led Congress to go along with him.
The auto industry is certainly performing well as Trump prepares to take office later this month. December sales were stronger than expected, and U.S. sales of new cars and trucks reached a record high for the year.
MarketWatch said sales grew for the seventh year in a row, quoting Autodata; full-year sales rose 0.4 percent, to 17.55 million. At General Motors, the December gain was 10 percent, and sales at Nissan climbed 9.7 percent.
“Key economic indicators, especially consumer confidence, continue to reflect optimism about the U.S. economy, and strong customer demand continues to drive a very healthy U.S. auto industry,” GM’s chief economist Mustafa Mohatarem told Reuters.
The manufacturing economy in general ended the year “on a high note,” Rob Martin, an economist at Barclays bank, told CBS News.
Manufacturing activity expanded to its highest level in two years. The Institute for Supply Management said last week that its manufacturing index rose to 54.7 last month from 53.2 in November — the highest reading since the end of 2014. Any reading above 50 indicates growth.
“The manufacturing sector ended 2016 on a buoyant note, with promising signs that growth could pick up further in 2017,” Chris Williamson, chief business economist at IHS Markit, told MarketWatch.
This week’s top economic reports are back-end-loaded. Economy watchers will have to wait until Friday to see data on December retail sales (the consensus forecast is that they rose 0.7 percent) and consumer confidence.
The University of Michigan’s preliminary Consumer Sentiment Index for January is expected to rise to 99.0 from 98.2 in December, which was the highest reading for the index since January of 2004.
For a Jan. 4 report, Bloomberg asked economists and analysts whose forecasts have been the most consistently close for the past two years what they expect in 2017.
"We see U.S. growth rising to a 2.5 percent to 3 percent range in 2017, following the slowdown experienced in 2016," Christophe Barraud, chief economist at Market Securities LLP in Paris, told Bloomberg.
"Households will remain the key driver of growth amid further drop in unemployment rate and rising wages," and Trump's economic policies "could support growth through different aspects such as deregulation, tax reductions for companies and households" which would probably happen in the first half, with possible retroactive effects.
Infrastructure spending could provide a boost in the second half of the year at the earliest, added Barraud, Bloomberg’s top-ranked economist overall, although the first half of 2018 seems more likely.