Job Market Finishes Strong, Capping An Impressive Year Of Hiring

The U.S economy added over 300,000 jobs in December, marking the best monthly performance since February and capping the strongest year of hiring since 2015. The strength in job growth in December did not translate to the transportation and logistics sector, however, which was weighed down by job losses among parcel companies.

Job growth surged to end the year

The Bureau of Labor Statistics (BLS) reported that the economy added an impressive 312,000 workers to payrolls in December, up from 179,000 in the previous month. This far exceeded consensus estimates of a gain of 184,000 and is the strongest monthly gain since the 324,000 jobs added in February of this year. In addition, data from both November and October were revised upward by a combined 95,000 jobs, bringing up the average job growth for the fourth quarter to 254,000 jobs per month.  During 2018, over 2.6 million workers were added to payrolls in the U.S. economy. That is up from the nearly 2.2 million jobs added in 2017, and marks the best year of job growth since 2015.

Despite the strong pace of hiring, the unemployment rate crept up to 3.9% in December from the near 50-year low of 3.7% in the previous month. This increase was mainly driven by an increase in labor force participation, as over 400,000 people joined the workforce during the month. This is a positive sign for the labor market, as it means that tight labor market conditions are drawing people in to seek employment. Wage growth also performed well in December, rising 0.4% as year-over-year growth climbed to 3.2%.

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As is usually the case, growth during the month was led by the service sector, which added 227,000 workers to payrolls during the months led by big gains in health care, education, and professional services. On the goods side of the economy, both manufacturing and construction saw solid gains in employment in December, with each adding over 30,000 workers to payrolls.

Transportation hiring slips, but trucking continues to add workers

Trucking jobs keep climbing

Despite the general strength in hiring in the economy, job growth in the transportation and logistics sector stumbled in December, as employment grew by just 2,200 during the month. The main culprit was a 5,200 job decline among couriers and messenger services, which is mostly parcel companies such as UPS UPS and FedEx Corporation FDX. However, several transportation industries struggled during the month, with most registering job growth below 1,000 in December.

Within the transportation sector, the trucking industry performed relatively well by adding 2,900 workers to payrolls during the month. This marks the eighth consecutive month with positive job growth and puts trucking employment 2.5% higher than at this point last year. For the year, the trucking industry added 36,600 jobs in 2018, up from 9,400 added in 2017 and is the best year for hiring within trucking since the 50,400 jobs added in 2014.

Behind the numbers

The December jobs was almost universally positive, with jobs, wages, and participation all moving in the right direction. It also serves as a useful reminder that the economy is still functioning fairly well despite some of the negatives that have emerged over the past couple of weeks. The plunge in the stock market, combined with weakening manufacturing readings and concerns over the trade dispute with China, led some to believe that a recession is around the corner in 2019. There are still areas of concern for the year, especially as it relates to freight demand, but keep in mind that the majority of economic activity in the U.S. is consumer spending. With the labor market performing as well as it is, consumer fundamentals are going support growth for the near future. This should keep the economy going even if the pace of growth slows down.

That does not mean that the economy is completely out of the woods, however. Employment figures are usually a lagging indicator, meaning that the economy will typically slow down first  before hiring trends change. Right now, hiring in the economy is on an upward trend. We believe that the economy has already started to slow down over the past couple of months, and eventually, the pace of hiring will slow to match the change in overall activity.

On the transportation side, December's results finish off an impressive year for the capacity-constrained trucking industry. The pace of hiring in the industry has outpaced the rest of the economy for several months now, which has helped to ease the capacity crunch from where it was earlier in the year. The drop in hiring by parcel companies probably does not mean much in the grand scheme of things. The decline comes on the heels of strong hiring in the previous couple of months, which would suggest that parcel companies simply ramped up their hiring for the holidays earlier than they normally would. Parcel companies did well with on-time delivery during the holiday surge, and an earlier holiday ramp up in hiring would have helped achieve that. Courier and messenger employment is still over 9% higher than it was at this point last year and is one of the fastest growing industries in the entire economy.

Ibrahiim Bayaan is FreightWaves' Chief Economist. He writes regularly on all aspects of the economy and provides context with original research and analytics on freight market trends. Never miss his commentary by subscribing.

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