There was a lot of important information on the U.S. economy released this week, but the biggest data point is without a doubt the latest monthly job report from the Bureau of Labor Statistics out this morning. Indeed, total nonfarm employment in America rose by 225K payrolls in January, a record 112th consecutive month of net job growth in this country. The big increase was perhaps inflated a bit by temporary hiring related to the upcoming government census, but the November and December figures were also revised higher. That resulted in a less-volatile 3-month average payrolls gain of 211K, the best reading in a year and comfortably above what is needed to keep up with U.S. population increases. Employment growth, though, has clearly slowed compared to earlier this cycle, but this is consistent with the gradual decline in job creation we suggested should continue to occur in the tight labor market.
Put simply, monthly gains of 250K or more payrolls should become increasingly rare or else there is still a lot of slack left in the job market. Also of note, labor force participation improved in January to the best level since 2013 as the favorable employment conditions continued to attract people back into the labor market who had previously given up on finding a job. The rate of joblessness also ticked higher as the increase in job seekers (re-entrants) offset the solid payrolls gain, in line with our 2020 outlook. Moreover, the rise in participation over the past few years has increased the labor supply and in turn helped explain why the decline in the unemployment rate has slowed despite steady hiring, as well as why wage growth by some measures has appeared muted. However, average hourly earnings growth firmed in January, and most of the weakness again appears to be concentrated in higher-wage industries and occupations. Some incessant critics of the economic expansion have argued that wage gains only appear stronger for lower-income Americans due to a recent string of minimum wage hikes, but research from the Federal Reserve Bank of Atlanta has showed that such earnings growth has also improved in states without any minimum wage raises. Altogether this was another solid monthly job report that demonstrates how the U.S. labor market is still doing just fine more than a decade into the expansion.
Sources: Econoday, U.S. DoL, FRBSL