 | Nonfarm Payrolls Increased 257,000 in January |
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| Posted Under: Data Watch • Employment |
Implications: The pace of improvement in the labor market has clearly picked up. Nonfarm payrolls increased 257,000 in January and were revised higher to gains of 423,000 in November and 329,000 in December, with all the upward revisions coming from the private sector. Payrolls have now been up 200,000+ for eleven consecutive months, including three gains north of 300,000 and one beating 400,000. The growing strength in job creation was reinforced by civilian employment, an alternative measure of jobs that includes small-business start-ups, which increased 759,000 in January and is up at a 314,000 average rate over the past three months. However, the unemployment rate ticked up to 5.7% in January from 5.6% in December because the labor force rose by 1,051,000. As a result, the labor force participation rate increased to 62.9%. The best news in today's report was that average hourly earnings (which doesn't include fringe benefits like health care or tips, irregular bonuses, or commissions), increased 0.5% in January and are up 2.2% from a year ago. While some may argue that recent minimum wage hikes among states are the source of higher earnings, we don't believe this is the case. Combined with a 3.3% increase in the number of hours worked in the past year, total cash earnings are up 5.6% from a year ago, which means consumer purchasing power is accelerating upward. Faster job growth and growing consumer purchasing power support our view that the Federal Reserve remains on track to start raising rates at the meeting in June. The share of voluntary job leavers (or "quitters") among the unemployed rose to 9.5% in January, the highest since 2008. In the past, Fed Chair Janet Yellen has said a higher quit rate is a sign of strength in the labor market. In the past year, nonfarm payrolls have increased 267,000 per month while civilian employment is up 250,000 per month. The labor market is gathering strength relative to the current business cycle and the expansion in the previous decade, but still suffers from bad policies (like easy access to disability benefits and overly generous student aid) that are holding the labor market back from improving even faster. Despite those policies, and little sign they'll be lifted soon, we continue to expect even more job growth, less unemployment, and faster wage growth in the year ahead.
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