If the five-week shutdown had any impact on the economy, employers overlooked it — in droves. In January, the US added the most jobs in nearly a year, as the Bureau of Labor Statistics reported net job creation for the month at 304,000. Unemployment rose a little higher to 4.0% as temporary layoffs surged in the public sector due to the shutdown:
Total nonfarm payroll employment increased by 304,000 in January, and the unemployment rate edged up to 4.0 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in several industries, including leisure and hospitality, construction, health care, and transportation and warehousing.
Both the unemployment rate, at 4.0 percent, and the number of unemployed persons, at 6.5 million, edged up in January. The impact of the partial federal government shutdown contributed to the uptick in these measures. Among the unemployed, the number who reported being on temporary layoff increased by 175,000. This figure includes furloughed federal employees who were classified as unemployed on temporary layoff under the definitions used in the household survey.
The labor force participation rate remained above 63% for the second straight month, demonstrating that more of the old overhang has been reversed:
The labor force participation rate, at 63.2 percent, and the employment-population ratio, at 60.7 percent, changed little over the month; both measures were up by 0.5 percentage point over the year.
The former number had been stuck around 62.7% for five years or more. Analysts insisted that the generationally low number was the result of the leading edge of Baby Boomer retirement, but the growth in that number over the past year strongly suggests that workers are reentering the labor force as jobs open up. It matches a similar growth in the employment-population ratio that had been stuck in the 59+% range since the Great Recession until January 2017. It has grown almost a full point over the past two years.
Over the same period, wages have begun rising after years of stagnation. The BLS reports that wages have increased 3.2% over the past year after a modest rise in January. That also suggests that a labor overhang was keeping wage growth down, and that we have either eliminated or greatly reduced that overhang in the past couple of years.
Today’s results blew far past Reuters’ predictions, even accounting for a downward revision for November and December:
Nonfarm payrolls jumped by 304,000 jobs last month, the largest gain since February 2018, the Labor Department said. Job growth was boosted by hiring at construction sites, retailers and business services as well as at restaurants and hotels.
But data for November and December was revised down to show 70,000 fewer jobs created than previously reported. The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.
Economists polled by Reuters had forecast payrolls increasing by 165,000 jobs in January.
CNBC noted that the results are counterintuitive, especially considering the season:
Economists surveyed by Dow Jones had expected payrolls to rise by 170,000 and the unemployment rate to hold steady at 3.9 percent.
In all, it was a powerful performance at a time when economists increasingly have said they expect growth to slow in 2019. January marked 100 months in a row of positive job creation, by far the longest streak on record.
It’s a bonanza of a report for Donald Trump, a solid win on the economy — and a much-needed change of subject on the shutdown. The report demonstrates that worry over the economic impact of the shutdown was mostly exaggerated, at least up to the point when it ended. Had air traffic snarled any further, it likely would have had bad impacts on job growth in February, but for the most part the shutdown didn’t have an impact outside of those directly affected by the furlough.
Can the economy maintain this momentum? Trump needs months like these in September and October 2020 more than he needs them in January 2019. But the White House will still be glad to see this now nonetheless, and they should be.