U.S. Jobs: January Numbers Arrive with a Bang
The U.S. Bureau of Labor Statistics' employment report for January took everybody by surprise, and in a good way. According to the consensus forecast from labor economists, expectations for January job growth fell at 187,000, with unemployment expected to rise from 3.5 to 3.6 percent.
Instead, 517,000 jobs were created, and unemployment dropped to 3.4 percent. The Washington Post called these job gains "astonishing" and reported that unemployment dropped to a level not seen since 1969 (more than 53 years back). Given that stock markets don’t much like surprises, all are trending down as I write this story. Go figure!
What Does It Mean, Mr. Wizard?
Most obviously, this shows that the job market is much stronger than labor economists and their like believed or expected it to be. The logical consequence is continued upward pressure on wages. Both the Post and the Wall Street Journal (WSJ) observed the ratio of 1.9 jobs available for every person seeking employment in January.
The markets' collective reaction rightly reflects growing concerns about upward pressure on wages acting to spur further inflation, despite the Fed’s latest quarter-point rate hike earlier this week (February 1). Additional rate hikes, which had seemed increasingly less likely, now seem almost inevitable. Too bad, eh?
The Numbers Speak to Broad, Sometimes Deep Job Growth
The latest screed from the Bureau of Labor Statistics described the overall situation by saying: "Job growth was widespread in January(.)" It also named leisure and hospitality, professional and business services, and healthcare as especially bright spots among the dozen-plus sectors it tracks. Here are more January 2023 details:
Leisure and hospitality grew by 128,000 jobs. That’s 39,000 jobs more than the 2022 monthly average of 89,000. Of this total, food services and drinking places accounted for nearly 70 percent (99,000 jobs). Accommodation also added 15,000 jobs. Despite continuing growth in this sector, however, it's still down by nearly 500,000 jobs (2.9 percent) from pre-pandemic levels. Thus, it’s not unreasonable to expect continued growth in this sector.
Professional and business services added 82,000 jobs, with half that (41,000) in professional, scientific, and technical services. This exceeds 2022 monthly averages of 63,000 by 19,000 jobs (30 percent).
Government employment, bouncing back from a strike among California higher education workers in January, rose by 74,000. That state's government workers accounted for nearly half (35,000) of that amount.
Healthcare grew by 58,000 jobs, of which 30,000 went to ambulatory healthcare services, 17,000 to nursing and residential care facilities, and 11,000 to hospitals. Here again, the January numbers top the 2022 monthly average for this sector: 58,000 for January vs. 47,000 for 2022 (23 percent).
Retail trade added 30,000 jobs, of which 17,000 went to general merchandise retailers, 7,000 to furniture, home furnishings and so forth, while health and personal retailers lost 6,000 jobs. That said, the 2022 monthly average was a paltry 7,000, so January’s number represents a whopping 429 percent growth!
Construction added 25,000 jobs, mostly in 22,000 jobs for specialty trade contractors. That’s a bit higher than the 2022 monthly average of 22,000 jobs per month (just under 14 percent).
Transportation and warehousing grew by 23,000 jobs, on par with the 2022 monthly average (same number). Support activity for transportation accounted for 7,000 of that total.
Social assistance added 21,000 jobs, somewhat above the 19,000 monthly average for 2022 (10 percent).
Manufacturing increased by 19,000 jobs, significantly lower than the 2022 monthly average of 33,000 jobs.
Other sectors tracked showed little change. These are named in the report as mining, wholesale trade, information (our home sector), financial activities, and other services. That means that nine of the 14 sectors grew, while the others were mostly flat. Hence the observations that job growth is widespread, and also deeper in some sectors than others.
What About Wages, and Inflation?
Average hourly wages in January for all employees on private nonfarm payrolls were up by 10 cents (0.3 percent). They now stand at $33.03 an hour, and are up by 4.4 percent over the past 12-month period. That’s still lower than inflation, which for December 2022 (the most recent month available, with January’s numbers due on Feb. 14) are reported at 6.5 percent.
That’s down from recent months but still significantly higher than the Fed's target 2-to-2.5 percent range. Hence, the reactions of the markets to the initial news. That said, they’re up considerably since I started writing this story, with the major indices now in a range from +0.06 percent (DJIA) to -0.24 percent (S&P 500).
Overall, I can’t help but see this latest jobs report as good news for U.S. workers, and not terrible for their employers. It will be interesting to see the consensus forecast for next month in light of these numbers, and in light of opposing concerns about job and wage growth. It certainly promises to be an exciting (if perhaps bumpy) ride!