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United States Labor Market January 2020

United States: Payrolls grow at solid pace at outset of year

Non-farm payrolls increased by 225,000 in January, outpacing market expectations of 160,000 new jobs and up from December’s upwardly revised 147,000 gains (previously reported: 145,000). The three-month average non-farm payroll gains picked up to 211,000 in January from 198,000 in December. That said, the annual benchmark process, which revised historical data, showed payroll growth in 2019 was weaker than previously reported, with the over-the-year change in total nonfarm employment for 2019 revised down from 2,108,000 to 2,096,000.

Employment growth was particularly robust in construction in January, likely boosted by milder weather conditions this winter which may have affected the BLS’ seasonal adjustment. Payrolls in the transportation and warehousing industry also rose at a solid rate. Moreover, job creation in education and healthcare expanded at quick clip, while gains in leisure and hospitality were also strong. Conversely, manufacturing payrolls continued to decline at the start of the year, while the retail trade sector also logged job losses.

The unemployment rate ticked up from its near 50-year low of 3.5% in December to 3.6% in January. However, this was largely due to a higher labor force participation rate, which rose to 63.4% from 63.2%. Hourly earnings rose 0.2% month-on-month in January, gaining traction from December’s 0.1% growth. Annual wage growth strengthened to 3.1% in January from 3.0% in December.

Commenting on the implications of January’s jobs report, analysts at Nomura noted:

“While weather helped boost employment growth in January, a return to seasonal temperatures in the months ahead will likely weigh on construction and other weather sensitive industries, creating room for downside surprises. […] That will be increasingly important, as the Boeing production halt and ongoing coronavirus outbreak increase the likelihood of disruptions to other economic data. However, we think the labor market remains quite strong.”

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