January Jobs Report Beats Expectations
Total nonfarm payroll employment rose by 225,000 in January, beating economists’ expectations, the Bureau of Labor Statistics reported on Friday.
The report said the unemployment rate ticked up to 3.6 percent in January as labor force participation increased. BLS said notable job gains occurred in construction, in health care and in transportation and warehousing.
BLS revised nonfarm payroll employment for November up by 5,000 to +261,000 and December up by 2,000 to +147,000. With these revisions, employment gains in November and December combined were 7,000 higher than previously reported. After revisions, job gains have averaged 211,000 over the past three months.
The report said after accounting for annual adjustments to the population controls, the civilian labor force rose by 574,000 in January, and the labor force participation rate edged up by 0.2 percentage point to 63.4 percent. The employment-population ratio, at 61.2 percent, changed little over the month but rose by 0.5 percentage point over the year.
“The January jobs report was stronger than expected,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting with the Mortgage Bankers Association. “Last month’s increase in construction employment (44,000 jobs) was a positive development for housing, as the homebuilding sector has been challenged by labor shortages and high costs.
Sarah House, Global Economist with Wells Fargo Securities, Charlotte, N.C., said while the trend in hiring has firmed and wage growth is beginning to pick up again, the report will not likely change the Federal Reserve’s current stance.
“Over the course of this cycle, Fed officials have emphasized that job growth of only 100K, or even a bit less, is needed to reduce labor market slack given labor force dynamics,” House said. “But labor force participation has been more resilient than many expected. Despite the downward pressure from an aging workforce, the participation rate has edged higher over the past few years amid a vigorous rebound in prime-age—especially women’s prime-age—participation.”
Odeta Kushi, Deputy Chief Economist with First American Financial Corp., Santa Ana, Calif., said a stronger labor market sets the stage for strong spring home buying season
“Another bright spot is January’s 1.9 percent year-over-year gain of residential construction labor, signaling that the productivity of construction labor is likely to increase, Kushi said. “This is a tailwind for the housing market, as finding ways to increase the productivity of construction workers is critically important to alleviating the labor shortage challenge and the gap between household formation and home building.”
Kushi said the housing market is being buoyed by lower mortgage rates, favorable demographics and continued yearly growth in wages, which contributes to higher household income and stronger purchasing power. “Build it and they will buy it,” she said.
“We believe this report should give the Federal Reserve confidence to remain ‘on hold’ regarding changes in the federal funds rate target for the foreseeable future,” said Doug Duncan, chief economist with Fannie Mae, Washington, D.C.
BLS said average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $28.44 in January. Over the past 12 months, average hourly earnings have increased by 3.1 percent. Average hourly earnings of private-sector production and nonsupervisory employees rose by three cents to $23.87 in January.
The average workweek for all employees on private nonfarm payrolls was unchanged at 34.3 hours in January. In manufacturing, the average workweek remained at 40.4 hours, while overtime edged down 0.1 hour to 3.1 hours. The average workweek of private-sector production and nonsupervisory employees edged up by 0.1 hour to 33.6 hours.
“Increasing wage growth is a welcome sign for households looking to buy a home this spring,” Kan said.
