January’s BLS Report: Strong on Jobs, Weak on Wages

January’s BLS Report: Strong on Jobs, Weak on Wages

The US economy added 227,000 jobs in January, significantly outperforming predictions, but unemployment ticked up to 4.8 percent and average hourly earnings rising only 3 cents, the Bureau of Labor Statistics reported on Friday. Job growth was strongest in the retail, construction, and financial sectors, each of which added tens of thousands of positions. The number of full-time jobs rose by 457,000 to 124.7 million, while part-time jobs fell by 490,000 to 27.4 million, according to the BLS’s household survey, and the labor force participation rate rose by 0.2 percentage points to 62.9 percent.

While job growth remained robust in the last month of the Obama administration, the stagnant wage figure may give the Federal Reserve cause to think twice before raising interest rates, Yahoo Finance’s Myles Udland observes:

Following Friday’s report, Neil Dutta, an economist at Renaissance Macro said, “[The] Fed has no need to rush. Participation rate rose and hourly earnings were soft but workweek extended and jobs rose nicely.”

The uptick in the labor force participation rate is, aside from the headline job gains, perhaps the most positive part of this report, as it indicates folks who had likely been completely done looking for work again sought to come back into the labor force. This broadly squares with improving consumer and business sentiment readings we’ve seen since the election, as taking the leap of faith to move from not looking for work at all to attempting to find a job requires some level of confidence about the economy.

Rising employment figures may look like good news for the recently inaugurated President Donald Trump, but Business Insider‘s Elena Holodny points out that this report does not reflect anything that has happened since Trump was inaugurated:

The survey reference period that the job growth numbers are based on is the pay period including the 12th of the month. Therefore, technically, this jobs report looks at numbers from the final days of the Obama administration. At the same time, various sentiment indicators have ticked up in the months after Trump’s election, suggesting that the new president may have influenced these figures.

“The US economy is riding a wave of bullish consumer sentiment right now, not uncommon following presidential elections in the past,” Andrew Chamberlain, chief economist at Glassdoor, wrote after the report. “However, technically today’s BLS survey is for the pay period containing the 12th of the month, about a week before the Presidential inauguration. So it doesn’t likely reflect any actions since the Trump administration formally took office – something we’ll be watching for closely in the coming months.”

At Fortune, Stephen Gandel writes that the good jobs numbers actually “could cause some issues for President Trump’s efforts to push through his policy proposals”:

Trump has called for tax cuts and infrastructure spending to boost the economy, which he has characterized as a disaster. But the strong increase in jobs in January may make it harder to continue to make that case and to prove that his stimulus efforts are needed.

Friday’s stronger then-than-expected jobs number could also cause some issues for the Fed. The U.S. central bank’s indication that it would go slower on raising interest rates, was seen by many as a fear that uncertainty around Trump’s policy proposals were adding risk to the economy. But with a stronger-than-expected jobs report, the Fed may have to push rates up, instead of waiting to see how the Trump economy will unfold.

Politics aside, the Wall Street Journal highlights two labor market figures—underemployment and long-term joblessness—that remain troubling:

A broad measure of unemployment and underemployment, known as the U-6, was 9.4% in January. That was its highest level since October and nearly twice the level of the official jobless rate, which is known as the U-3. The measure includes discouraged job-seekers who have stopped looking for work, other people marginally attached to the labor force, and part-time employees who say they want but can’t find full-time work.

As of January, 24.4% of unemployed Americans had been out of work longer than six months. That was 1.9 million people, a figure that fell by 244,000 over the previous 12 months. Long-term unemployment remains elevated from prerecession levels, though it has come down since peaking in mid-2010 at a little less than half of the unemployed population.

At the Journal’s live blog, meanwhile, Ben Eisen sees signs that the likelihood of an impending hike in the Fed rate has dropped considerably:

Traders in the market for fed funds futures, which show market expectations for the path of interest rates, are paring their bets on a more aggressive Federal Reserve. The market suggests a 63% chance of a Fed rate increase by June, down from 69% on Thursday. There’s now only an 8.9% chance of a move by March, versus 18% on Thursday, according to CME Group data.

That’s being chalked up to the disappointing wage-growth numbers. Ian Lyngen, a rates strategist at BMO Capital Markets, writes to clients that the average hour earnings result “brings into question the likelihood that the Fed moves in March.”