EconoFACTS

February 07, 2020 | 09:11

U.S. Nonfarm Payrolls (Jan. 2020) — Jolter

Economist

Director and Senior Economist
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

Sal Guatieri

Director and Senior Economist
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

American companies kicked off the new year in high style, cranking out 225,000 net new jobs in January. This fits with a spate of other indicators (ISMs, auto sales, consumer confidence) that suggest resilience in the economy. Gains in the prior two months were revised modestly higher to 147,000 in December and 261,000 in November. The six-month average payrolls gain (205,500) is up materially from the prior half year (136,500), suggesting good momentum in hiring. Benchmark revisions cut the monthly average pace in the year to March 2019 to 169,000 from an initial tally of 210,000, but what matters is the stronger trend since then (190,400). While manufacturing continued to shed jobs (-12,000) in January, construction more than picked up the slack (+44,000), though likely, in part, due to warmer-than-usual weather. Governments added 19,000 workers, with likely support from temporary Census hiring. A drop in household employment (-89k after +267k in December) and a two tenths jump in the participation rate (great for incomes) nudged the unemployment rate up a tenth to 3.6% from a 50-year low, while the U6 "underemployment" rate bounced off a record low (back to 1994) to 6.9%.

The increased margin of slack in labour markets is keeping a tight grip on wages, with average hourly earnings up 0.2% in the month and a moderate 3.1% in the past year.

Aggregate weekly work hours rose 0.2%, which, given firmer productivity, may suggest some upside risk to our 1.2% call for Q1 GDP growth. The 0.8 ppts estimated slice from Boeing's halted 737 MAX production might be less than we assumed. Either that, or companies are responding more enthusiastically to the Phase One trade deal by ramping up hiring and, possibly, investment. We'll see. Still, the coronavirus is bound to make a deeper impression in the February numbers, so it's premature to start hiking our Q1 growth call.

Our scorecard grades the January report at 52.3, little changed from the prior month but still on the plus side of neutral. The report won't win any Oscars, but it's an impressive picture given widespread labour shortages.

The jobs report supports the Fed's extended pause plan. The jump in hiring means the economy is in a "good place", though the light wage print and uptick in joblessness will only reinforce concerns about inflation staying below the target. The Fed's on hold for now, but only if core inflation picks up this year.

Table 1 - United States — Employment

(change in thousands)

Source: BMO Economics, Haver Analytics