Job growth gives the economy an upbeat start to the year
Payrolls expanded by 225,000 in January, helped by mild weather, and more people were drawn into the labor market.
Job growth accelerated last month, posting a strong start to an election year in which the economy could prove pivotal.
Employers added 225,000 jobs in January and the unemployment rate stayed near a half-century low, the Labor Department reported on February 7. Perhaps most encouragingly, the strong labor market continued to pull in workers off the sidelines, giving opportunities to people who were left behind in earlier stages of the decade-long economic expansion and suggesting that companies can keep adding jobs without running out of workers.
“It means we don’t have to settle for a lower pace of job growth,” said Michelle Meyer, chief United States economist for Bank of America Merrill Lynch. “Not only is there demand for labor, there’s supply to fill that demand, and that’s a very positive narrative.”
Hiring slowed somewhat last year amid trade tensions and recession fears, but the job market has proved resilient, adding jobs for 112 straight months, far and away a record. That strength is good news for the president, who has made the economy the centerpiece of his bid for re-election. He hailed the January figures on Twitter.
Most economists say the president and his policies deserve relatively little credit for the economy, which has held to largely the same trajectory under the current president as under his predecessor. But there are signs that the current president’s pitch is working: Consumer confidence is up among independents, a potentially decisive constituency in the November election, and his approval ratings have risen in recent weeks.
Still, Democrats have not shied away from talking about an economy that they say is working better for wealthy investors than for ordinary families. The report on Friday gave them ammunition as well. Wage growth remained lackluster, as it has for much of the expansion. A major annual revision knocked hundreds of thousands of jobs off earlier estimates from 2018 and 2019. And January job growth probably would have been weaker had unusually warm winter weather not lifted employment in the construction and hospitality sectors.
Nor was there any evidence in the figures released Friday of the “blue-collar boom” that the president cited in his State of the Union address on Wednesday. Manufacturers cut 12,000 jobs, with most of the losses coming among automakers, and employment also dipped in the mining sector. Job growth in freight transportation was also weak, the latest evidence that the ripple effects of the trade war are continuing to spread.
John Wilbur has seen the industrial slowdown up close. At Roadmaster Group, a trucking company based in Arizona that he runs, business cooled last year as a drop in trade volumes and a slump in the manufacturing sector reduced demand for its big rigs.
Mr. Wilbur had hoped that newly completed trade deals with China, Mexico and Canada would lead to a rebound this year. Then Boeing announced in December that it was shutting down production of its troubled 737 Max aircraft.
“That supply chain is broad and deep, and I think a lot of people don’t even know when they’re being hit by that shutdown,” Mr. Wilbur said.
Now the coronavirus outbreak in China is threatening to further disrupt global trade, with unpredictable effects on the American economy.
“Right when that trade deal gets done, then you throw coronavirus on it, so it’s a little tough to gauge where we are,” Mr. Wilbur said. “Certainly the coronavirus is nothing that anyone budgeted or forecast.”
The data in the jobs report was collected before the coronavirus began to spread, and there have been few signs so far that the outbreak has affected the American economy. Data for the February jobs report will be collected next week, and investors and policymakers will be watching closely for any signs that companies or consumers have become more cautious as a result of the virus.
“I feel like people won’t breathe a sigh of relief until they see a February report,” said Ellen Zentner, chief United States economist for Morgan Stanley.
Despite that uncertainty, this is by many measures the best environment for workers in years. The unemployment rate ticked up in January to 3.6 percent, from 3.5 percent in December, but only because more people joined the labor force to look for work. Employers are hiring candidates with disabilities, criminal records and other barriers to employment, and are offering perks to attract workers.
Amy Glaser, senior vice president at the staffing firm Adecco, said employers were increasingly willing to let people work from home and to set their own schedules, steps that can make jobs attractive to stay-at-home parents, rural residents and others who might otherwise remain outside the job market. And they are increasingly offering performance bonuses to try to get more out of their work forces.
But companies remain reluctant to raise base pay, a step that standard economic theory associates with a tight labor market. Ms. Glaser said many of her clients in low-wage industries had waited so long to increase pay that they would need to offer several dollars more per hour to be competitive.
Why won’t they budge? “I ask myself that daily when we sit in front of our clients,” Ms. Glaser said.
Wage growth did pick up slightly in January, with average hourly earnings rising 3.1 percent from a year earlier. But that still reflects a slowdown from the middle of last year, when growth briefly hit 3.5 percent.
“The wage momentum looks like it’s cooled,” Ms. Zentner said. “Wages are rising, it’s just still a lackluster pace compared to what we’d like to see.”
For policymakers at the Federal Reserve, however, the combination of strong hiring and moderate wage growth could be welcome news. The central bank cut interest rates three times last year in a bid to keep the expansion from stalling. The report released on Friday is a sign that effort is working, without causing the economy to overheat.
The report also provided new evidence of the effect of the Fed’s recent policy moves. The Labor Department said that the economy added 514,000 fewer jobs in 2018 and early 2019 than initially reported, but that job growth was stronger later in 2019 than was previously known.
These benchmark revisions, which align the monthly survey-based estimates with more definitive data from state unemployment insurance records, are made annually but were much larger than usual this year. The revisions were largely in line with preliminary estimates released last summer.
Taken together, the new figures support suggestions that the Fed’s rate increases in 2018 may have acted as a brake on job growth, but that the 2019 cuts helped drive a rebound in hiring, as lower borrowing costs gave a lift to the housing market.
The revisions are also the latest evidence that the economic jolt delivered by the Republican tax cuts in 2018 was milder and ended sooner than it initially appeared. Earlier revisions to gross domestic product, which likewise downgraded estimates of 2018 growth, told a similar story.
“There were lots of skeptics when it passed that it would have much pass-through” to the larger economy, Julia Coronado, president of MacroPolicy Perspectives, an economics consulting firm, said of the tax law. “And now the data confirms that there wasn’t much pass-through.”
The revisions kept alive the economy’s record-setting streak of monthly job gains, but by the slimmest of margins. The new figures show that employers added just 1,000 jobs last February, down from 56,000 before the revision.