Hiring activity started 2019 with a bang, adding 304k new jobs in January. This comes off a downwardly revised but still robust December hiring tally (now +222k, 312k previously). Hiring has averaged 241k new jobs per month over the past three months, only slightly below the 254k pace reported in December.
The unemployment rate did move up a tick to 4.0%, lifted by government workers who were furloughed during the government shutdown. Over the household survey reference week (January 6-12th), approximately 380k federal employees were neither working nor being paid, and would have been classified as unemployed. Therefore, the uptick in the unemployment rate is expected to be reversed in February.
The BLS highlighted that the number of people working part-time for economic reasons was also likely to have been boosted by the government shutdown. The broadest measure of unemployment (the U6) which includes these workers jumped up from 7.6% to 8.1% in January.
The good news in the household survey was another increase in the participation rate to 63.2%. The rate is now up 0.5 percentage points over the past year as a strong labor market draws in a greater share of workers.
In the payrolls data, hiring was strong in leisure and hospitality (+74k), construction (+52k), health care (+42k) and transportation and warehousing (+27k). As expected, there were no discernible impacts of the partial federal government shutdown on the estimates of employment, hours, and earnings from the establishment survey.
The closely watched measure of wage growth – average hourly earnings – was a bit softer than expected, rising 0.1% on the month. On a year-on-year basis, wages were up a healthy 3.2% in January (down slightly from 3.3% in December). After revisions, wage growth has now been running above 3% since August.
The January data also featured the annual benchmarking process and updated seasonal adjustment factors, which shifted the profile of job gains over the course of 2018, but didn’t materially affect the hiring trend for the year as a whole.
Key Implications
Boom. Downward revision aside, the overwhelming conclusion from today’s numbers is that the U.S. labor market remained incredibly strong at the start of 2019 – resilience that should not go unnoticed by policymakers. There was little to find fault with in the January numbers. Hiring was broad based by industry, wage growth remained decent, and the share of core-aged people (25-54) with jobs was the highest it’s been in about eleven years
January’s job gains marks a record-setting 100th straight month of payroll gains for the U.S. economy. As outlined in our recent forecast the pace of growth in the U.S. economy is likely to slow over the course of 2019, and hiring is expected to slow along with it, but there is little signs of that yet in recent data. Even with half the pace of monthly gains recorded over the last several months, the unemployment rate will continue to drift lower through the year.
Today’s job report gave a taste of the shutdown-clouded data to come. On top of the incomplete economic picture we are looking at due to delayed data releases, other data for January going forward may be tainted by shutdown impacts. This will make it harder to disentangle whether any slowdown is temporary due to the shutdown, or an indication of a weakening trend. It could be spring before we get a cleaner picture of the current state of the U.S. economy.
