THE EMPLOYMENT SITUATION

At first glance the December employment report shows that the trends throughout 2012 were unchanged in December.  But within the report there were some greater signs of strength.

Private payroll employment showed a gain of 155,000 and the household survey reported a much smaller gain of only 28,000.  These changes are about the same  as they have been all year.


Private payroll employment was up 166,000 as government employment fell again.

But on a year over year change the two reports are still showing very similar gains.

 The workweek increased from 33.7 to 33.8  the second consecutive month of  a 0.4% gain.

As a result, the index of aggregrate hours worked rose 0.5% after a 0.4% jump last month.

These are some of the largest gain this cycle and the chart shows how the rate of gain is moving back up to the trend experienced earlier in the cycle.

Moreover, average hourly earnings rose 0.3%.   The year over year increase and the smoothed three month growth rate strongly suggest that wage growth is bottoming.   This is good news.  But on the other hand it is exactly the type of change the inflation hawks are warning us about


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