Job creation was strong again January as the economy added 304,000 jobs, well above expectations for 165,000. Some of that is offset by downward revisions to the previous months that lowered prior gains by 70,000. Even so, that net result was a meaningful surprise to the upside.
Against what was otherwise a strong report, a few underlying numbers may still raise a few eyebrows.
Given the strength of job creation, it may be surprising that the unemployment rate rose for the second consecutive month, retracing its path back to 4.0%. That increase in the jobless rate has moved higher in concert with rising participation in the labor force. The ranks of the employed have risen by more than 3.8 million in the past year – very much consistent with a growing economy. It’s the very strength of that economy and the abundance of job openings that is pulling more individuals back into the labor force. The participation rate rose by nearly 1.0% since January 2018, adding nearly 3.2 million to the ranks of those either employed or looking for a job.
Given that strength, wage growth has been less robust than would typically be expected, particularly for an economy nearly ten years into expansion. Still, wage gains were tepid in January, rising by a scant 0.1%. Over that past year, wage growth of 3.2% was still reasonably good.
Growth in the labor force driven by the continuing return of individuals who had previously been on the sidelines has provided a “hidden pool” of available labor that wasn’t otherwise readily apparent in the unemployment rate. These are people who weren’t even looking for a job a year ago, but have been drawn back into the workforce for any number of reasons. In the absence of that, the competition for workers would be even more intense, and would undoubtedly put greater upward pressure on wages.
Given the recent domination of headlines by the government shutdown and indications that the economy is slowing, the January jobs report is a ray of sunshine, providing some reassurance to those looking for good news.
Certainly, the economy has slowed, and that will undoubtedly be apparent in other data in the coming weeks. Still, the jobs market remains a bright spot. Employers are still hiring at a strong pace. That’s good news for the consumer sector, and ultimately good news for the economy.
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