US Nonfarm Payrolls in January rose 517,000, much higher than the expected 185,000 after the prior increase revised 260,000 increase in December (from 223,000). December’s nonfarm payroll change was skewed toward 443k in the private sector, but government was also up by 74k. A key gauge for the Fed, average hourly earnings growth moderated to 4.4% year-over-year from 4.6% in December. Average hourly earnings rose 0.3% (consensus 0.3%) after a revised 0.3% increase in December (from 0.3%).
The report has the market questioning the prospect of the Fed cutting rates before the end of the year, as it is thought the remarkable strength of the report could have the Fed questioning its own conviction about pausing rates soon.
The average workweek rose to 34.7 hours in January from 34.3 hours in December. The unemployment rate fell to 3.4% in January from a revised 3.5% in December (from 3.5%). The last time the unemployment rate was lower was in 1951. Private payroll company ADP reported that US jobs grew just 106,000 private payrolls in January (consensus 170,000).
January 2023 US Employment Report
The jobless rate was 3.4% in January the Labor Department reported Friday. The unemployment rate is under the February 2020 pre-pandemic rate of 3.5%, which was a 50-year low.
Job growth is moving away from sectors that benefited from growth drivers earlier in the pandemic toward the sectors that serve the innate desire to get back to more normal activities and have worker shortages as evidenced by high job vacancies. In nutshell layoffs are being absorbed by the job market in this rotation.
January 2023 US Employment Report and Expectations
Highlights
Employment
- Change In Nonfarm Payrolls Jan: 517K (est 189K; prevR 260K)
- Unemployment Rate Jan: 3.4% (est 3.6%; prev 3.5%)
- Labour Force Participation Rate Jan: 62.4% (est 62.3%; prev 62.3%)
- Prior two-month net revision with employment gains in November and December combined being 71K higher than previously reported.
The unemployment rate and number of unemployed persons prior to the coronavirus (COVID-19) pandemic was 3.5 percent and 5.7 million, respectively, in February 2020). The number of employed persons in The United States increased to 160138 thousand in January of 2023 from 159244 Thousand in December of 2022.
- Change In Private Payrolls Jan: 443K (est 190K; prevR 269K)
- US Change in Manufacturing Payrolls Jan: 19K (est 7K; prevR 12K)
- Change in Government Payrolls Jan +74K (prev +3k)
- Household survey Jan +894K (606k PT/2nd jobs) vs -+717K prior
- U6 Underemployment Rate Jan: 6.6% (prev 6.5%)
- Birth-death adjustment Jan -144K
- Long-term unemployed Jan 1.1 mil vs (prev 1.1m, 1.2m pre-pandemic)
- The long-term unemployed accounted for 19.5 percent of all unemployed persons.
- The employment-population ratio Jan 60.2% vs (prevR 60.2%, 61.2% before pandemic)
Earnings
- Average Hourly Earnings (M/M) Jan: 0.3% (est 0.3%; prevR 0.4%)
- Average Hourly Earnings (Y/Y) Jan: 4.4% (est 4.3%; prev 4.6%)
- Average Weekly Hours All Employees Jan: 34.7 (est 34.3; prevR 34.3)
- Manufacturing workweek little changed at 40.1 hours.
- Factory overtime declined 0.2 hour to 2.9 hours.
- Payrolls benchmark NSA revision for 2022
- Payroll benchmark SA 2022
Beyond the payroll growth in January, which was widespread and included a gain of 128,000 for leisure and hospitality, a 105,000 increase in private education and health services, and a 25,900 increase in temporary jobs, the unemployment rate of 3.4% was the lowest since 1969. In turn, the average workweek jumped to 34.7 hours from 34.4 hours, which was a boon for aggregate wage growth.
The market had expected the December report released Friday to show nonfarm payrolls rose 202k new jobs. December continues the drop from an average of 439K in the first eight months of the year, as higher interest rates and prices started to weigh on the economy. Private payroll company ADP reported that US jobs grew just 235,000 private payrolls in December (consensus 153,000).
A severe labor shortage had driven up annual wage increases above 5% every month of this year until last month. By contrast, wage gains averaged 3.2% in the 12 months to February 2020. Wage growth rose last month. Average hourly earnings rose by 0.3% in December from a month earlier. They were up 4.6% from a year earlier.
Employers hired across industries. Companies in certain industries that are vulnerable to interest-rate increases, such as technology and real estate, have announced layoffs. Some firms have implemented hiring freezes.
Participation
Labor force participation rate moved up to 62.4% vs. 62.3% prior; rate for men (orange) moved down to 67.9%; rate for women (purple) moved up to 57%. Participation is down from 63.4% in February 2020.
Major improvement for prime-age labor force participation rate, which moved up in January to 82.7
Multiple jobholders as % of total employed ticked down in January to 5
Total nonfarm employment has increased by around 22.0 million since hitting a trough in April 2020 and has returned to the pre-pandemic level. The number of unemployed persons rose by 48 thousand to 6.01 million in November, while the number of employed decreased by 138 thousand to 158.5 million. Since February 2020, government employment is down by 461 thousand, or 2.0 percent.
Market Reaction
The report itself being good news for the economy is seen as mixed news for bond and stock markets, thinking it will hold any eventual pivot on rates by the Fed with its monetary policy. The report says still higher for longer with respect to the target range for the fed funds rate.
- The terminal Fed funds top has moved
- Treasury yields rose sharply after the report. The 2-yr note yield, at 4.10% shortly before the jobs report, sits at 4.24% now. The 10-yr note yield, at 3.39% shortly before the release, sits at 3.50% now.
- USDJPY up from 128.55 to 129.83. EURUSD down from a pre-level of 1.0922 to 1.0843.
- The S&P 500 futures are down 53 points and are trading 1.3% below fair value. The Nasdaq 100 futures are down 262 points and are trading 2.1% below fair value. The Dow Jones Industrial Average futures are down 225 points and are trading 0.7% below fair value.
WSJ Fedwatcher Nick Timiraos on the jobs report:
Fed officials face a fork in the road when forecasting inflation: focus on moderating wage and price trends or persistently low unemployment and steady hiring
Where the Jobs Were:
Job gains were widespread. In September, 5.2 percent of employed persons teleworked because of the coronavirus pandemic, down from 6.5 percent in the prior month. In May 2020, the first month these data were collected, 35.4 percent of employed persons teleworked because of the coronavirus pandemic. These data refer to employed persons who teleworked or worked at home for pay at some point in the 4 weeks preceding the survey specifically because of the pandemic.
Largest gains occurring (prior month) in:
- Leis/hosp +128k (+64k)
- Educ/health svcs +105k (+76k)
- Bus svcs +82k (+39k)
- Retail trade +30k (+1k)
- Temp help +26k (-41k)
- Constr +25k (+26k)
- Trans/warehse +23k (+13k)
- Mfg +19k (+12k)
- Whsl trade +11k (+11k)
- Info -5k (-5k)
- Autos/parts -7k (+9k)
Other January Employment Reports
Household Survey Data
Both the unemployment rate, at 3.4 percent, and the number of unemployed persons, at 5.7 million,
changed little in January. The unemployment rate has shown little net movement since early 2022.
Among the major worker groups, the unemployment rates for adult men (3.2 percent), adult women
(3.1 percent), teenagers (10.3 percent), Whites (3.1 percent), Blacks (5.4 percent), Asians (2.8 percent),
and Hispanics (4.5 percent) showed little change in January.
The number of persons jobless less than 5 weeks decreased to 1.9 million in January. The number of
long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.1 million.
The long-term unemployed accounted for 19.4 percent of the total unemployed in January.
In January, both the labor force participation rate, at 62.4 percent, and the employment-population
ratio, at 60.2 percent, were unchanged after removing the effects of the annual adjustments to the
population controls. These measures have shown little net change since early 2022 and remain below
their pre-pandemic February 2020 levels (63.3 percent and 61.1 percent, respectively).
The number of persons employed part time for economic reasons, at 4.1 million, was little changed in
January. These individuals, who would have preferred full-time employment, were working part time
because their hours had been reduced or they were unable to find full-time jobs.
The number of persons not in the labor force who currently want a job was 5.3 million in January,
little changed from the prior month. These individuals were not counted as unemployed because they
were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take
a job.
Among those not in the labor force who wanted a job, the number of persons marginally attached to
the labor force, at 1.4 million, changed little in January. These individuals wanted and were available
for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4
weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached
who believed that no jobs were available for them, was also little changed over the month at 342,000.
Establishment Survey Data
Total nonfarm payroll employment rose by 517,000 in January, compared with an average monthly
gain of 401,000 in 2022. Job growth was widespread in January, led by gains in leisure and hospitality,
professional and business services, and health care. Employment also increased in government, partially
reflecting the return of workers from a strike.
Private Jobs
- Leisure and hospitality added 128,000 jobs in January compared with an average of 89,000 jobs per month in 2022. Over the month, food services and drinking places added 99,000 jobs, while employment continued to trend up in accommodation (+15,000).
- Employment in leisure and hospitality remains below its pre-pandemic February 2020 level by 495,000, or 2.9 percent.
- In January, employment in professional and business services rose by 82,000, led by gains in professional, scientific, and technical services (+41,000). Job growth in professional and business services averaged 63,000 per month in 2022.
- Health care added 58,000 jobs in January. Job growth occurred in ambulatory health care services (+30,000), nursing and residential care facilities (+17,000), and hospitals (+11,000). In 2022, health care added an average of 47,000 jobs per month.
- Employment in retail trade rose by 30,000 in January, following little net growth in 2022 (an average of +7,000 per month). In January, job gains in general merchandise retailers (+16,000) and in furniture, home furnishings, electronics, and appliance retailers (+7,000) were partially offset by a decline in health and personal care retailers (-6,000).
- Construction added 25,000 jobs in January, reflecting an employment gain in specialty trade contractors (+22,000). Employment in the construction industry grew by an average of 22,000 per month in 2022.
- In January, transportation and warehousing added 23,000 jobs, the same as the industry’s average monthly gain in 2022. Over the month, employment in support activities for transportation increased by 7,000.
- Employment in social assistance increased by 21,000 in January, little different from the 2022 average gain of 19,000 per month.
- Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; wholesale trade; information; financial activities; and other services.
Government Jobs
Government employment increased by 74,000 in January. Employment in state government education increased by 35,000, reflecting the return of university workers after a strike.
Manufacturing Jobs
Manufacturing employment continued to trend up in January (+19,000). In 2022, manufacturing added
an average of 33,000 jobs per month.
Earnings
In January, average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or
0.3 percent, to $33.03. Over the past 12 months, average hourly earnings have increased by 4.4 percent.
In January, average hourly earnings of private-sector production and nonsupervisory employees rose
by 7 cents, or 0.2 percent, to $28.26.
Wages Monthly
Wages Yearly
The average workweek for all employees on private nonfarm payrolls rose by 0.3 hour to 34.7 hours in
January. In manufacturing, the average workweek increased by 0.4 hour to 40.5 hours, and overtime
increased by 0.1 hour to 3.1 hours. The average workweek for production and nonsupervisory
employees on private nonfarm payrolls increased by 0.2 hour to 34.1 hours.
Hours
The change in total nonfarm payroll employment for November was revised up by 34,000, from
+256,000 to +290,000, and the change for December was revised up by 37,000, from +223,000 to +260,000. With these revisions, employment gains in November and December combined were 71,000
higher than previously reported. (Monthly revisions result from additional reports received from
businesses and government agencies since the last published estimates and from the recalculation of
seasonal factors. The annual benchmark process also contributed to the November and December
revisions.)
The Employment Situation for February is scheduled to be released on Friday, March 10, 2023, at
8:30 a.m. (ET)
Source: AFP, Challenger, DOL, TradersCommunity Data, BLS
From The TradersCommunity News Desk