The U.S. created a robust 225,000 new jobs in January to get off to a good start in 2020, reflecting surprising resilience in the labor market even though manufacturing has contracted and the economy has softened. The economy has added an average of 211,000 new jobs in the past three months, a marked acceleration from last fall and summer. Unseasonably warm weather in January likely gave hiring an added boost. The unemployment rate, meanwhile, edged up to 3.6% from a 50-year low of 3.5% as more people entered the labor force in search of work. The rate tends to rise if not all the new entrants find jobs right away, but it is considered a sign of a strong labor market.
An ultra-tight labor market has put more upward pressure on wages, though paychecks are still not growing as fast as they usually do when unemployment is so low.
The increase in worker pay over the past 12 months rose slightly to 3.1 per cent, but it sits below the post recession peak of 3.5 per cent. The U.S. stock market fell in Friday trades after several days of big gains. The increase in new jobs easily surpassed the 164,000 forecast of economists surveyed by MarketWatch. The construction industry, buoyed by lower mortgage rates and greater demand for new housing, led the way by adding 44,000 jobs. Unusually warm weather in January may have also helped, economists say, so some letup is expected in the next month or two. Health-care providers and hotels and restaurants both created 36,000 new jobs. Transportation companies added 28,000 workers, mostly package deliverers and warehouse stockers. And professional businesses hired 21,000 people. Employment in manufacturing, however, fell for the third time in the past four months. The industry shed 12,000 jobs as it struggles to recover from the trade war with China that dented exports in 2019. Executives were hoping to see improvement in 2020 after the U.S. and China signed an interim trade deal, but the coronavirus has thrown a kink in those plans.
The retail industry also trimmed employment. In an expected change, the government reduced its estimate of how many new jobs were created in 2019 and 2018 by about a half-million after examining company tax records and payroll data. Employment gains in 2019 were cut to 2.09 million from 2.11 million. In 2018, the increase in new jobs was lowered to 2.31 million from 2.68 million. The pace of hiring is surprisingly strong more than 10 and a half years after the last recession, fuelling the longest expansion in U.S. history. Companies aren’t adding as many workers as they were a few years ago, but many complain they can’t find enough skilled workers to fill a still-high number of job openings. Hiring is likely to slow later in the year, analysts say, because of an extremely tight labor market and a somewhat slower economy. Yet the U.S. only has to add about 100,000 new jobs a month to absorb new workers entering the labor force and nudge the unemployment rate even lower.
Perhaps more vexing — if it can be called that — is an apparent halt in wage growth at about 3% a year. The economy cannot grow much faster if worker pay doesn’t increase any faster. Economists predict the U.S. will expand about 1.5% this year compared with 2.3% in 2019. The sliver lining to modest wage growth is stable inflation. Low inflation has allowed the Federal Reserve to cut interest rates to help support the economy and ward off the threat of recession. “Another month of knockout jobs numbers is, at this point, astounding,” said Steve Rick, chief economist at CUNA Mutual Group. “Despite where we’re at in the economic cycle, and the number of looming uncertain factors, this just goes to show that the labor market is more than buoyant.”
“This expansion has continuously disappointed on wage and pay gains, but its ability to pull more and more workers into the labor force is astounding,” said economic research director Nick Bunker of Indeed Hiring Lab. The Dow Jones Industrial Average and S&P 500fell in Friday trades. The S&P 500 and Nasdaq Composite Index have both rallied to records, clawing back from a big drop last week tied to worries over the coronavirus.
MarketWatch
