Those that were aiming high for the January jobs report were disappointed on Friday. Those thinking maybe December’s figure would see a nice upward revision were wrong too, according to the monthly Employment Situation report from the Department of Labor’s Bureau of Statistics. Those that wanted to see the markets blow-off the weaker-than-expected month and rally into the weekend, just may get their wish.
The Labor Department said that the U.S. added just 113,000 jobs during January, well below the 171,000 that economists expected. Meanwhile the meager 74,000 jobs that were estimated last month to have been created in December were only revised upward to 75,000. November’s figure got a stark upward revision from 241,000 new jobs to 274,000.
Originally, economists suggested that unseasonably cold and snowy weather was the cause of the weak numbers in December. The slow trend continuing in January rebuts those contentions that December was an anomaly, even if it was still bitterly cold in some parts of the country in January. Typically the cold weather hits the construction industry the hardest, but in January construction added 48,000 payrolls, indicating that Mother Nature wasn’t the root of low jobs growth. In December, construction shed 22,000 jobs.
Meanwhile, the unemployment rate ticked down another tenth of a percent to 6.6 percent in January, marking a new post-recession low. Importantly, the trend of people giving up looking for work reversed course. In recent months, the labor participation rate – the number of people employed or actively looking for a job – fell to roughly 30-year lows. The large number of discouraged people was largely responsible for the unemployment rate falling for 7.2 percent in October to 6.7 percent in December. Although it didn’t exactly gallop ahead, the participation rate stopped falling in January and improved modestly to 63.0 percent from 62.8 percent in December. The fact that 499,000 people went back to work or began seeking employment is a little ray of sunshine in Friday’s report.
Other than construction, some industries also posting notable jobs gains in January were manufacturing (+21,000), professional and business services (+36,000), leisure and hospitality (+24,000) and wholesale trade (+14,000).
Retail trade was a laggard, losing 13,000 jobs. The federal government also decreased employment by 12,000, with the largest portion of departures coming from the U.S. Postal Service (-9,000).
The average workweek for all private nonfarm employees was unchanged in January at 34.4 hours. Average hourly earnings rose by 5 cents to $24.21. In the last twelve months, average hourly earnings have increased by 46 cents, or 1.9 percent.
The January report combined with the December jobs report may be cause for new Federal Reserve Chairman Janet Yellen to take a pause and consider the main bank’s next move to further reduce its economic stimulus package. In the last two months, the Fed has cut its purchases of Treasuries and mortgage-backed securities by $20 billion per month to $65 billion.
Wall Street dipped at first following the less-than-expected report, but has shrugged it off as the day moves on. The Dow is up by 96 points, the S&P 500 has climbed 14 points and the Nasdaq has risen 48 points. If the gains can hold through the afternoon, all three indexes will have staged strong recoveries to end the week ahead after being deep in the red mid-week.