U.S. employment increased less than expected in December but a rebound in wages pointed to sustained labor market momentum that sets up the economy for stronger growth and further interest rate increases from the Federal Reserve this year.
Nonfarm payrolls rose by 156,000 jobs last month, the Labor Department said today. The gains, however, are more than sufficient to absorb new entrants into the labor market.
Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the work-age population. Employers hired 19,000 more workers than previously reported in October and November.
"Job creation and overall labor market conditions remain solid. With the potential for stronger fiscal stimulus in the form of infrastructure spending and tax cuts, job creation appears likely to remain on a solid footing in 2017," said Jim Baird, chief investment officer for Plante Moran Financial Advisors in Kalamazoo, Michigan.
The economy created 2.16 million jobs in 2016. Average hourly earnings increased 10 cents or 0.4 percent in December after slipping 0.1 percent in November. That pushed the year-on-year increase in earnings to 2.9 percent, the largest gain since June 2009, from 2.5 percent in November.
While the unemployment rate ticked up to 4.7 percent from a nine-year low of 4.6 percent in November, that was because more people entered the labor force, a sign of confidence in the labor market. Economists had forecast payrolls rising by 178,000 jobs last month.
The dollar rose against a basket of currencies, while prices for U.S. government bonds fell. Stocks on Wall Street were trading higher.
Other data on Friday showed the trade deficit widening 6.8 percent to $45.2 billion in November as imports rose to their highest level in more than a year on higher oil prices.
The employment report added to data ranging from housing to manufacturing and auto sales in suggesting that President-elect Donald Trump is inheriting a strong economy from the Obama administration. The labor market momentum is likely to be sustained amid rising business and consumer confidence.
Trump, who takes over from President Barack Obama on Jan. 20, has pledged to increase spending on the country's aging infrastructure, cut taxes and relax regulations. These measures are expected to boost growth this yea