Friday, February 1, 2013

January Employment Report

The January employment report was released this morning and it contained pretty good news about the job market.  The headline numbers showed that employment rose by 157,000 in January (private employment rose by 166,000) while the unemployment rate rose to 7.9%.  Once one digs into the details, the news is mixed but generally positive.  First, employment for November and December was revised up by 127,000.  Given the revisions, the economy added 181,000 jobs per month, on average, for 2012.  The strength of the job market is reassuring given the weak GDP report.

The household survey was not quite as positive as the establishment survey (the establishment survey is generally regarded as superior when assessing the growth in employment).  Not only did the unemployment rate increase slightly (back to where it stood in October 2012, but down from 8.3% in January 2012) while the employment-population ratio remained at 58.6% (up 0.1% from a year ago).  This continues the pattern of moderate employment growth, enough to accomodate growth in the labor force, but not much more (note: the participation rate didn't change and is down by 0.1% over the last 12 months).  On a related note, the broad measure of unemployment (U6) was unchanged at 14.4% (down from 15.1% one year ago and from the peak of 17.1% in late 2009/early 2010).

Though employment rose in terms of the number of job holders, hours worked was flat to negative in many sectors, with the exception of education and health services.  Average hourly earnings were up slightly in January and now have risen 2.1% over the last 12 months, slightly ahead of inflation (which is about 1.5% according to the latest figures).

What are the takeaways?  Despite the weakness of the GDP report (even after removing the effect of inventories), employment growth remains moderate, countering fears of a possible recession.  The recent trend in employment suggests an economy growing closer to 2% than 0%.  Optimists will point to the upward revisions in employment for late 2012 while pessimists will point to sluggish employment gains that are not strong enough to make a dent in the unemployment rate.  For further analysis, though I haven't looked at it yet, I'm counting on Bill McBride of calculated risk to provide solid analysis of the job report.