U.S. Jobs: January Numbers Are Encouraging
After almost a decade of scary slow growth and lingering pockets of unemployment and discouraged workers, I've become skeptical about good news. But we're seeing a years-long trend of slow and steady growth and improvement, and the January numbers are pretty much continuing proof that the U.S. economy has at long last dug itself out of the hole formed when the sub-prime lending crisis cratered financial markets in 2008-2009.
In covering today's report from the U.S. Bureau of Labor Statistics, the Reuters headline is a bit more emphatic "U.S. hiring accelerates; annual wage growth strongest since 2009."
Job growth from January 2017 thru January 2018. The three-month average sits near the top of the range, at or near 200,000 jobs per month. Source: Bureau of Labor Statistics
Their lead reads "U.S. job growth surged in January and wages increased further, recording their largest annual gain in more than 8.5 years, bolstering expectations that inflation will push higher this year as the labour market hits full employment." British spelling notwithstanding, that's a pretty rosy assessment of the same results I just looked at myself.
While I'm inclined to find them encouraging, I'm not prepared to stand fully behind the breathless excitement that the Reuters verbiage might convey to those who've not devoted themselves to "the dismal science" (as economists describe their field of study to themselves).
What we do find in the latest numbers is the following:
? Nonfarm jobs increased by 200,000 for January, a nice uptick from the revised figure for December of 160,000. December 2017 originally reported at 148,00, producing a bump of 12,000. By the same token, November jobs were revised more substantially downward, from 252,000 to 216,000, a drop of 36,000 jobs.
The net-net for November-December is a decline of 24,000 jobs over those two months, adjusting the previous month's report. That puts the average run rate for the last three months at 192,000 jobs per month. That exceeds the 2017 average monthly job creation of 181,000 by 11,000 jobs (or about 6 percent). Not bad, not bad at all!
? Employment has held rock-steady at a 17-year low value of 4.1 percent for the last 4 months. We really to seem to have hit a low that indicates employment is as close to full as such things get.
? Average hourly earnings rose 0.3 percent for January, on top of December's 0.4 percent rise. Year-over-year hourly earnings have grown by 2.9 percent. According to Reuters, that's the largest gain since June of 2009, and a jump of 0.2 percent over December. At the same time, the average workweek feel by 0.2 hours to 34.3 hours.
That means more money for less work, which is a proposition that all workers can cheerfully endorse.
? The employment sectors that registered growth in January included construction, manufacturing and food services. Growth in these areas means people are spending more money on building things, buying goods, and eating (and drinking) out. All of these things are signs of improved consumer and business confidence, and an increased willingness to part with cash, rather than hanging onto it.
This is grounds for optimism, and for Reuters' surprising and interesting assertion that "the Federal Reserve could be a bit more aggressive in raising interest rates this year . The U.S. central bank has forcecast three rate increases this year after raising borrowing costs three times in 2018."
The bottom line is that most economists seem to expect continuing wage increases in 2018, enough so that inflation might actually reach or even exceed the Fed's 2.0% target for the first time since the Great Recession of 2008-2009. We'll just have to see about that!
A Closer Look at Job Gains
Jumping back to the U.S. BLS report, here's what they have to say about the job increases. Construction's 36,000 new jobs for the month came mostly from specialty trade contractors (+26,000). Residential construction added another 5,000 to that total, with the remaining 5,000 spread across other construction niches. That's about double the 12-month trailing average of 19,000 jobs per month.
Food services, which the report labels as "employment in food services and drinking places" added 31,000 jobs in January. Here, that's about 10,000 jobs higher than the 12-month-trailing average of 21,000 jobs per month. Health care added 21,000 jobs in January, of which 13,000 came from hospitals. That's 3,000 less than the 12-month trailing average of 24,000.
Manufacturing's gains were all in durable goods, at 18,000 jobs. This compares to the twelve-month trailing average of 15,500, for a slight gain in the 2-3,000 range. Overall, though, we see more gainers than winners, even among all sectors currently showing noticeable job gains. Remaining sectors continue to hold steady.
Overall, I still believe the Reuters take is a bit over the top. That said, closer inspection of the news shows very few negatives and a lot of positives, so we can all agree that improvement continues. With job growth holding firm at the higher end of the range and wage growth forecasts positive and believable, it could be that 2018 will be the year we turn the proverbial economic corner.
It may not yet be time to party, but it might be OK to start a bit of cautious party planning. Time will tell, as it always does.