December hiring surged: Employers added 312,000 jobs

People stand in line to apply for jobs at a fair in Miami Lakes Florida

While the broader labor market remains strong, the Institute for Supply Management (ISM) survey published on Thursday offered a downbeat assessment of the manufacturing sector, with nearly all components declining last month.

The dollar shot higher after the numbers were released. "New orders have dried up and this will take a toll on business investment and growth in 2019". Factory activity in China and the United States have both weakened, with the Institute for Supply Management's US manufacturing index on Thursday posting its steepest decline in a decade.

The drop was the largest since October 2008, when the economy was in the throes of a recession.

The manufacturing sector added 284,000 jobs over 2018, a 37 percent increase, making 2018 the best year for manufacturing since 1997.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose two-tenths of a percentage point to 63.1 percent, the highest level since September 2017.

"This should, at least for today, mute expectations that the Fed is off the table completely this year", said Omair Sharif, a senior economist at Societe Generale in NY.

The economy grew at a 3.4 percent pace in the third quarter. Computer and electronic product manufacturers said "growth appears to have stopped".

President Donald Trump called the job growth "GREAT" on Twitter. Apple CEO Tim Cook said China's growth was hurt by "rising trade tensions with the United States". That followed weaker-than-expected manufacturing figures from the eurozone and China, underscoring expectations for other major economies around the world to slow.

Data this week showed factory activity weakened across much of Europe and Asia in December, with Chinese manufacturing contracting for the first time in 19 months.

Overall unemployment increased by 0.2 points to 3.9 percent in December, with 419,000 Americans out of work.

Stocks surged on the news, along with word that the USA and China will hold trade talks next week and comments from Federal Reserve Chairman Jerome Powell that the Fed will be flexible in judging whether to raise interest rates further.

The Fed increased borrowing costs last month for the fourth time in 2018, but forecast fewer rate hikes this year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

But in recent weeks, financial markets have been increasingly anxious about the path of economic growth this year. The ADP National Employment Report on Thursday showed private payrolls jumped 271,000 last month after increasing 157,000 in November.

There were also broad gains in hiring last month.

But employment components of the latest regional surveys and initial claims data suggest labour demand remains strong, according to Lewis Alexander, an analyst at Nomura.

The big unknown is the partial federal government shutdown.

"The ADP employment report has been susceptible to large swings in December that we think may be in part due to a year-end quirk that has tended to result in ADP printing high relative to payrolls in the final month of the year", said John Ryding, chief economist at RDQ Economics in NY.

Still, consumer confidence slid in December, the Conference Board said.

Nonfarm payrolls jumped by 312,000 jobs last month, the largest gain since February, as employment at construction sites snapped back after being restrained by unseasonably cold temperatures in November.

US stocks rallied on the employment report on Friday and extended gains after Powell's comments.

While there is still little evidence of inflation in the economy, the strong December jobs report may influence the Federal Reserve to stay on its stated course of raising interest rates at least twice in 2019.

Claims data tends to be noisy around year-end holidays.

Economists had forecast the pace of hiring would slow, as employers had trouble finding the workers they needed.

"Markets will probably be miserable no matter what the outcome", said Dan North, chief economist at Euler Hermes North America in Baltimore.

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