December's wage data were disappointing. Indeed, while private-sector payroll employment rose solidly by 240,000 and the average workweek for the sector was unchanged at 34.6 hours, the drop in private-sector wages by 0.2% month-over-month caused the Yardeni Research Earned Income Proxy to flatten during December after November's jump of 0.8%. That doesn't augur well for retail sales. However, the strong pace of employment and the boost to real incomes from lower energy costs should drive consumer spending higher in coming months. Let's review the employment report:
(1) Payroll employment rose 2.95 million last year, the best calendar-year gain since 1999. Revisions totaling 50,000 during October and November boosted the former's gain to 261,000 and the latter's to 353,000.
(2) Full-time employment rose to a cyclical high of 119.9 million at the end of last year, according to the household survey. That's the most since July 2008. Part-time employment fluctuated around 27.5 million last year. In other words, there is no evidence in these data that Obamacare boosted part-time employment, as was widely feared.
(3) The labor force fell 273,000 during December as the number of dropouts rose 456,000 to a record high of 92.9 million. Many economists have been expecting that this number would fall as the labor market tightened and encouraged more people to re-enter the labor force because jobs are easier to get. That hasn't happened so far. It is likely that many long-term unemployed workers are dropping out.
Source: Ed Yardeni — Ed Yardeni is the president and chief investment strategist of Yardeni Research Inc., a provider of independent investment strategy and economics research for institutional investors.
