January 2020 National Economic Outlook

Slower But Still-Solid December Job Growth; Strongest Housing Starts in More Than a Decade

Executive Summary

After a huge increase in employment in November, December job growth of 145,000 was more in line with the rest of 2019. Job growth in October and November was revised down by a combined 14,000. 

  • Private-sector employment rose by 139,000 in December, with government job gains of 6,000. Job growth averaged 176,000 per month in 2019, down from 223,000 in 2018. 

  • The unemployment rate remained at a 50-year low of 3.5 percent in December, the lowest it has been in 50 years (it was also this low in September and November). 

  • December wage growth was disappointing, with average hourly earnings up just 0.1 percent over the month. On a year-ago basis the average wage was up 2.9 percent, the first time wage growth has been below 3 percent since mid-2018. 

Housing starts jumped a staggering 16.9 percent in December to 1.608 million at a seasonally-adjusted annualized rate. This was the highest level of housing starts since December 2006, when the housing market was imploding following the housing boom, and the biggest monthly increase since October 2016. 

For all of 2019 starts were 1.290 million, up 3.9 percent from 2018. Single-family starts were 1.055 million in December, up 11.2 percent from November, and the highest level since June 2007. Starts can be volatile, particularly during the winter, when weather can be a major factor. But the recent strength in starts reflects more than just the weather. 

The fundamentals for the housing market are very good: mortgage rates down sharply since early 2019, the lowest unemployment rate in 50 years, good job gains and wage growth, record-high stock prices, and a movement back to homeownership over the shift to renting in the wake of the Great Recession and housing bust.

Industrial production fell 0.3 percent in December, the fourth decline in six months, and was down 1.0 percent from one year earlier. Manufacturing output rose 0.2 percent in December. The recent numbers have been skewed by the autoworkers strike against GM and then its resolution, but manufacturing output was basically flat throughout 2019. 

Slower global economic growth, trade tensions with China and associated uncertainty, a strong U.S. dollar, and low energy prices have all been drags. The industrial sector will take another huge hit in early 2020 with Boeing’s temporary shutdown of production of the troubled 737 MAX airliner.

Our economics team is consistently analyzing and forecasting national, regional and global economic trends.

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