Robust employment report underscores US economic strength

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The Labour Department is set to release its official December employment report Friday.

"The labor market is very strong even though the economy appears to be slowing", said Eric Winograd, senior USA economist at the investment management firm AllianceBernstein.

Concerns about the US economy rose following surveys showing sharp declines in consumer confidence and manufacturing activity last month, which roiled financial markets.

But in recent weeks, financial markets have been increasingly anxious about the path of economic growth this year. Builders added 38,000 construction jobs, while manufacturers increased their payrolls by 32,000 workers. That would amount to 1.87 million for 2019, less than the 2.27 million added in the first 11 months of 2018. And average hourly pay improved 3.2 percent from a year ago.

Job-gain estimates in Bloomberg survey range from 160,000 to 225,000.

The unemployment rate rose to 3.9 percent, reflecting more people quitting their jobs and new entrants to the labor force. "However, risks to the outlook have escalated lately and an expected moderation in economic growth will likely coincide with a less-robust pace of job creation as this year progresses". The average work week rose 0.1 hour to 34.5 hours.

The upbeat employment report from the Labor Department on Friday stood in stark contrast with reports this week showing Chinese factory activity contracting for the first time in 19 months in December and weak manufacturing across much of Europe. The Dow suffered its worst December decline since the middle of the Great Depression in 1931 as surveys of economists and business leaders suggested the United States could be in a recession by 2020.

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The unemployment rate rose to 3.9% as more people were looking for work. The strong wage gain makes a policy change unlikely.

Among the sectors and industries doing the most hiring last month were health care, food service, construction, manufacturing, and retail. The central bank last month forecast two rate hikes this year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

The U.S. government shutdown and Trump's attacks on the Fed and its chairman over the central bank's rate increases have also anxious investors, though Powell may have eased some of those concerns Friday when he stressed that he would not resign if the president told him to do so. However, the stock market will have to weigh whether the strong job growth encourages the Fed to hike rates in 2019 more frequently than investors had previously anticipated.

"The claims data suggest that conditions in the labor market have softened relative to a few months ago when the claims readings were very upbeat, but the extent of any deterioration is not entirely obvious and does not look extreme at this point", said Daniel Silver, an economist at JPMorgan in NY. The dollar.DXY surrendered earlier gains against a basket of currencies and U.S. Treasury yields rose. Last week included Christmas and preceded New Year's Day.

And businesses are still searching for more workers. The latest monthly jobs shows that the economic weakness causing stock markets to drop isn't yet visible in the employment figures.

Other indicators pointed to a slowdown in the manufacturing sector. Retailers hired 23,800 more workers. The ADP National Employment Report on Thursday showed private payrolls jumped 271,000 last month after increasing 157,000 in November.

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