January Employment Rises Sharply

Private-sector employment rebounded in January, beating expectations by a wide margin, according to this morning’s release from the US Labor Department. US companies added 237,000 workers last month, the strongest monthly increase since last July and well above December’s modest gain of 165,000.

The revival in growth lifted the year-over-year trend, too, boosting the annual pace for the first time in five months. Private payrolls rose 1.80% in January vs. the year-earlier level, a modest improvement over December’s 1.70% advance — a six-year low.


One weak spot in today’s report is weaker wage growth. Average hourly earnings increased 2.5% in year-over-year terms, the softest gain since last August. That’s disappointing, but the upbeat numbers for payrolls implies that a firmer wage trend may be coming.

A revival in job growth is, of course, a step in the right direction but it’s not obvious that the slow deceleration in the trend has stabilized, much less reversed. Keep in mind that the annual rate of job growth has been slowing for two years, punctuated by brief respites along the way. Perhaps the trend will stabilize, which is a reasonable guesstimate in the wake of today’s release. But one good month for the labor market is hardly a game changer and so it’s still prudent to assume that the employment trend will drift lower, albeit in a non-threatening degree for the foreseeable future.

Recent data surely leaves little room for pessimism. Yesterday’s jobless claims report, for instance, was clearly bullish… again. New filings for unemployment benefits fell to a seasonally adjusted 246,000 for the week through Jan. 28 – close to a multi-decade low. This leading indicator for the labor market continues to signal the all-clear for the near-term outlook.

“The number [for payrolls growth] is pretty right on target with the really positive momentum that we’ve seen in many of the markets over the last three to four months, particularly since the election,” says Tony Bedikian, head of global markets at Citizens Bank, via CNBC. “This keeps the trajectory of optimism on course.”

Fair enough, but the data still points to a deceleration in growth for payrolls. The good news is that the slowdown is gradual, which implies that a moderate expansion can roll on for quite some time before the trend looks worrisome. In turn, that buys the Trump administration time to roll out its plan for boosting economic growth through tax cuts, lighter regulation, and new infrastructure spending. Will it work? No one really knows at this point. The good news is that the labor market is in no imminent danger of slipping over to the dark side.