Notes on the U.S. Employment Situation for January 2020: U-Rate: 3.6 %; Payrolls up +225,000

OVERVIEW

• The unemployment rate rose to 3.6 percent in January with payrolls expanding by 225,000 jobs, according to the Bureau of Labor Statistics. 
• The Labor Force Participation (LFP) edged up to 63.4 percent with 574,000 workers joining the civilian labor force. The Employment-Population ratio moved up slightly to 61.2 percent and registered 0.5 of a percentage point gain over the year.
• Notable job gains took place in Construction (+44,000), Health Care (+36,000) and in Transportation and Warehousing (+23,000).
• Employment in Leisure and Hospitality (+36,000) continued to rise consistent with year-over-year trends. Over the past six months, the industry added 288,000 jobs.
• According to the BLS, the following sectors saw little or no change in January: Mining, Wholesale Trade, Retail Trade, Information, Financial Activities and Government.
• Over the year, average hourly earnings have increased by 3.1 percent. In January, the average hourly private nonfarm wage rang in at $28.44. The average workweek for all employees was unchanged at 34.3 hours.
• The number of long-term unemployed (27 weeks or more) remained at 1.2 million in January as it did in December. Meanwhile, 1.3 million workers identified as “marginally attached to the labor force” remained unchanged in today’s report.
• Revisions for the previous two months pushed the original estimates upward by 7,000. The payrolls report for November was revised from +256,000 to +261,000 and the change for December was also revised up from +145,000 to +147,000. After these revisions, job gains have averaged 211,000 over the last three months.

ANALYSIS

Today’s jobs report marks the finish line of Trump’s extraordinary week.  The state of the employment picture is stellar and strong -- impervious to any impeachment noise. 

Earlier in the week, ADP reported a gain of 291,000 private sector jobs, one of the payroll firm’s highest gains. Today, the BLS reported a gain of 206,000 private sector jobs. 

Moreover, wages are continuing their climb -- putting more money in the pockets of American workers. 

Wall Street expected a payroll increase of about 165,000 jobs.  Today’s report blew past that number with 225,000 jobs. The unemployment rate increased particularly because more people entered the workforce. 

According to Bloomberg, “…the [labor force] gain reflects the highest participation in almost two decades among prime-age women who are 25 to 54, called that because the years are key for career-building.” 

Bloomberg also noted that number mostly reflected the entrance of millennial workers. 

There is little downside in today’s payrolls report but some gloom in a side report from BLS where annual revisions eliminated a half million jobs from earlier counts from previous years. 

The high-profile and once-recovering Manufacturing sector remains stuck, unable to move in any direction in the last 12 months. 

Revisions to the previous months (an important measure to identify trends) show an actual increase of 7,000. “The report is unambiguously good,” said Ed Campbell, portfolio manager at QMA. “Strong growth and decent but not runaway wage growth should be good for stocks.” 

All this good news arrives in the context of global uncertainty over the Wuhan coronavirus and it is unclear when the effects work their way through the supply chain.  

Another question remains whether this impressive job growth is sustainable given Boeing’s 727 Max problems. 

For now, the job picture has rarely been brighter and brighter still for President Trump.“If the job market continues to perform as it is today on election day, it should be a tailwind to the president’s re-election,” Mark Zandi, chief economist at Moody’s Analytics told Bloomberg.  

But as Zandi also noted, the real jobs picture focuses on how well workers fare in the swing states come November 2020. 

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