This article is more than 5 years old

This article is more than 5 years old

The US economy appeared to be improving as the country added 252,000 jobs in December, with the unemployment rate dropping to 5.6%. The number of unemployed Americans declined by 383,000, which still leaves about 8.7 million people out of work.

December’s job report exceeded expectations. Economists expected the Bureau of Labor statistics to report growth of 240,000 in December, making the 2014 gains largest since 1999.



Over the year, the job growth averaged 246,000 jobs a month – a significant jump compared to 194,000 in 2013.

The “unusual warm-yet-snowy December” meant that weather did not have much impact on the jobs numbers, according to Goldman Sachs analysts.

While job growth saw positive gains, pay is not improving. Average hourly earnings took a hit, decreasing by 5 cents in December, following a 6-cent increase in November.

Goldman analysts predicted gains of 230,000 jobs and average hourly earning going up by 0.1%. Overall, the average hourly earnings for all workers rose 1.7% in 2014, which according to Goldman is “still below the 3% - 4% rate that Fed chair Janet Yellen identified as normal”.

Without the 3% to 4% wage growth, average workers will not benefit from the economic growth, the Economic Policy Institute said.

The number of American workers who wanted a full-time job but were only able to find a part-time job remained unchanged at 6.8 million. About 7.3 million Americans held more than one job. That’s means about 374,000 more people who took on a second job since 2013. About 3.9 million of them had one full-time job and one part-time job.

The number of Americans participating in the labor force in December declined by 776,000, causing the labor participation rate to drop to 62.5% from 62.8%. Participation rate for black Americans was even lower, at 61.3%. Their unemployment rate was 10.4%, which more than double the white unemployment rate of 4.8%.

Job seekers wait in line outside prior to the start of a job fair. Photograph: Bloomberg via Getty Images

The job gains of the past few months have not gone unnoticed and as both Democrats and Republicans prepare for 2016, they look to take credit for the improving economy.

“2014 was the strongest year for job growth since the 1990s. We’ve had 57 straight months of private sector job growth, created nearly 11 million new jobs,” Barack Obama said on Thursday while visiting Phoenix, Arizona. “Since 2010, we’ve put more people back to work than Europe, Japan, and every advanced economy combined.”

Earlier this week while visiting Ford assembly plant in Detroit, the president especially lauded job creation in manufacturing.

Car sales jumped 6% last year to the highest level since 2006, according to Autodata Corp. Analysts forecast that sales will reach 17m this year, near the record of 17.3m set in 2000. That should lead to more jobs at automakers, parts suppliers and dealers.

“Demand for autos remains robust. Low interest rates, falling gasoline prices and pent-up demand [are] driving sales,” Joseph Brusuelas, chief economist at McGladrey, said in a presentation on Wednesday. Brusuelas expects the jobs growth to continue into 2015, but pointed out that long-term underemployment and unemployment remain a challenge.

In December the number Americans who were unemployed for over 27 weeks “was essentially unchanged at 2.8 million”, reported the Bureau of Labor Statistics. That accounts for 31.9% of the unemployed.

Not everyone is sure that the growth will continue.

“It is doubtful that hiring will be sustained at this pace for much longer,” said Chris Williamson, chief economist at Markit. According to Markit’s research, the economy is losing momentum as companies grow more concerned about the economic outlook at home and abroad.

Those fears are not unfounded.

Europe is barely growing, and its unemployment rate is nearly double the US level. Japan, the world’s third-largest economy, is in recession. Russia’s economy is cratering as oil prices plummet. China is straining to manage a slowdown. Brazil and others in Latin America are struggling.

Fears about significantly cheaper oil spooked investors earlier this week before financial markets recovered. But most economists remain optimistic that lower energy prices will benefit US consumers and many businesses and give the American economy a further boost.