Stanton & Castleton, Inc. - Lake Forest, CA - Comprehensive Financial Solutions for Individuals & Businesses - 1 Orchard Rd, Suite 130, Lake Forest, CA 92630
Map & Directions
Stanton & Castleton, Inc. - Contact Us
Robert J. StantonFinancial Advisor &
Registered Principal, RJFS

Bob Stanton began his career on the pension side of the business and has also served as a retirement plan analyst and annuity consultant. Click here for more ...

Ronald A. Castleton Financial Advisor
Registered Principal, RJFS

Ron Castleton has built his practice as a financial advisor by helping to manage and preserve the wealth of individuals and businesses. Click here for more ...

Kevin Kraus Business Development
Kevin Kraus' role in Business Development is to establish and nurture relationships with other financial professionals such as CPA's and Attorneys. Click here for more ...

Economic Monitor – Weekly Commentary
by Scott J. Brown, Ph.D.

The December Employment Report

January 13, 2020

Job growth slowed last year, partly reflecting a tighter job market. However, wage growth, while higher in 2019, has remained moderate, much lower than one would expect given the low unemployment rate.

Private-sector payrolls averaged a 162,000 monthly gain in 2019, down from 215,000 in 2018. However, next month’s benchmark revisions to the establishment survey data (payrolls, hours, earnings) will reduce the March 2019 level of payrolls by about 500,000 (or -0.3%), which will push 2018 job growth lower. Slower global growth and trade policy uncertainty likely had an impact on job growth in 2019, but tighter job market conditions was likely a bigger factor.

The unemployment rate held steady at 3.5% last month. Benchmark revisions to the household survey data were minor. For the key age cohort, those aged 25-54, the unemployment rate remained at 3.0%, but the employment/population ratio hit 80.4%, the highest since the 2001 recession. The ratios for teenagers and young adults (20-24) remain below pre-recession levels. The rate for older workers has gradually trended higher.

Despite the tight job market, average hourly earnings rose modestly in December, moderating the year-over-year gain: +2.9% overall, and +3.0% for production workers. That’s a lot lower than one would expect in comparison to previous periods of low unemployment. The decline in union membership and a greater concentration of large firms explains part of that, but it does suggest that, with little danger of higher inflation, the Fed should remain accommodative as labor is reallocated to its highest and best use in the years ahead.

Data Recap – Iran’s missile attack on U.S. targets in Iraq had a short-lived impact on the financial markets as tensions quickly de-escalated. Nonfarm payrolls rose a little less than anticipated. Wage growth moderated despite low unemployment.

In its Global Outlook, the World Bank wrote that it expects global growth to pick up slightly in 2020, but “downside risks predominate, including the possibility of a re-escalation of global trade tensions, sharp downturns in major economies, and financial disruptions in emerging market and developing economies.”

The December Employment Report was close to expectations. Nonfarm payrolls rose by 145,000, with a net downward revision of 14,000 to October and November. Private-sector payrolls rose by 139,000, leaving the three-month average at 182,000 – a 162,000 average in 2019 (vs. 215,000 in 2018, although the 2018 figure will be revised lower in next month’s benchmark revision). The unemployment rate held steady at  3.5% (benchmark revisions to the household survey data were minor). For those aged 25-54, the unemployment rate remained at 3.0%, while the employment/population ratio hit 80.4%, the highest since the 2001 recession. Average hourly earnings rose just 0.1% (+2.9% y/y).

The ISM Non-Manufacturing Index rose to 55.0 in December, vs. 53.9 in November and 54.7 in October, consistent with moderate growth in the overall economy. Growth in business activity rebounded, but new orders moderated. Employment growth was moderate. Input price pressures were moderate. Comments from supply managers were mixed, with respondents positive about the potential resolution in trade tensions, but continued difficulties in finding skilled workers.

Unit Motor Vehicle Sales fell to a 16.7 million seasonally adjusted annual rate in December, vs. 17.1 million in November and 17.4 million a year ago. The underlying trend in vehicle sales has been flat to slightly lower in recent years (driven largely by replacement needs).

The ADP Estimate of private-sector payrolls rose by 202,000 in the initial estimate for December. Figures for October and November were revised higher (leaving the three-month average at 159,000).

The U.S. Trade Deficit narrowed to $43.1 billion in November, vs. $46.9 billion in October and $51.1 billion in September. Merchandise exports rose 0.7% (-1.4% y/y), while imports fell 1.4% (-5.7% y/y). About half of the decline in imports since August have been in consumer goods, likely reflecting stockpiling ahead of expected tariffs. Imports have a negative sign in the GDP calculation, so net exports are expected to add to 4Q19 GDP growth (although declining imports are not a sign of strength).

Factory Orders fell 0.7% in November (-1.5% y/y), reflecting a 72.9% plunge in defense aircraft orders (don’t read too much into that). Ex- transportation, durable goods orders edged down 0.1% (-0.4% y/y). Orders for nondefense goods ex-aircraft rose 0.2% (+0.4% y/y), with shipments down 0.3% (+0.2% y/y), trending about flat relative to 3Q19. (M20-2901693)

The opinions offered by Dr. Brown should be considered a part of your overall decision-making process. For more information about this report – to discuss how this outlook may affect your personal situation and/or to learn how this insight may be incorporated into your investment strategy – please contact your financial advisor or use the convenient Office Locator to find our office(s) nearest you today.

All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates (RJA) at this date and are subject to change. Information has been obtained from sources considered reliable, but we do not guarantee that the foregoing report is accurate or complete. Other departments of RJA may have information which is not available to the Research Department about companies mentioned in this report. RJA or its affiliates may execute transactions in the securities mentioned in this report which may not be consistent with the report's conclusions. RJA may perform investment banking or other services for, or solicit investment banking business from, any company mentioned in this report. For institutional clients of the European Economic Area (EEA): This document (and any attachments or exhibits hereto) is intended only for EEA Institutional Clients or others to whom it may lawfully be submitted. There is no assurance that any of the trends mentioned will continue in the future. Past performance is not indicative of future results.

© Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Stanton & Castleton, Inc. is not a registered broker/dealer, and is independent of Raymond James Financial Services. Privacy Policy.
This site is published for residents of the United States only. Raymond James’ financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact your local Raymond James office for information and availability.