Headline nonfarm payrolls rose by 227,000 in January, versus an anticipated 180,000. Meanwhile, December and November’s data points were revised upward to 157,000 and 227,000 respectively. The unemployment rate rose to 4.8%, while the participation rate was higher at 62.9%. There was a significant decline of 736,000 in the group classified as “not in the labour-force,” following an increase of 18,000 in December. The U6 unemployment rate (an expanded measure of unemployment that takes into account marginally attached and part-time workers) was higher at 9.4% in January. The household survey showed a decrease of 30,000 jobs in the month, following an increase of 63,000 in November. Meanwhile, the adjusted household survey (the BLS’s attempt to make it more comparable to the payroll survey) pointed to a decrease of 394,000 after a fall of 532,000 in December.
Private nonfarm average hourly earnings were 0.1% higher in January (0.2% for production and nonsupervisory workers) and follows a revised increase of 0.2% in December. Annually, they are now 2.5% higher (but only 2.4% for production and nonsupervisory workers); this indicates some upward pressure, but it is not intensifying. Private average weekly hours for production and nonsupervisory workers were unchanged for the fifth straight month; they are 0.3% lower on a year ago. The 227,000 change in January’s payrolls was largely due to retailing (46,000), professional and business services (39,000), leisure and hospitality (34,000), and finance (32,000). There was a decline in government sector (10,000), likely related to the transition to the new administration. Meanwhile, the mean duration of unemployment was again lower at 25.1.
Despite the strong pickup in nonfarm payrolls of 227,000, this report suggests there might be a little more slack in the labour market than some had anticipated. This can be seen through the large increase in the participation rate from 62.7% to 62.9%, in addition to the sharp drop in those considered to be not in the labour-force. Both of these related measures would suggest that workers who may have been considered as having completely given up on finding work are now stepping back in with the view to finding employment. If this pool of labour is indeed deeper than previously thought, it clearly gives the Fed a little more leeway with regard to keeping rates lower for longer. Second, the fact that the pace of average hourly earnings also decelerated, with gains of the last few months also revised downward, again suggests the Fed has a little more room to breathe. This in turn would suggest that the Fed was correct in not bringing forward guidance of the next rate increase from June to March.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.