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It Keeps Going, and Going, and Going
Employers added 225,000 jobs in January and the jobless rate was 3.6%, signs that the U.S. labor market is positioned to fuel economic growth in 2020. The robust payroll gain points to a continued healthy labor market in a U.S. economic expansion now in its 11th year. Signs of momentum: Over the past three months, the U.S. economy added an average 211,000 jobs. Job growth was revised higher in the last four months of 2019.
Jobs Data Hint at Productivity Revival
January’s 1.4% increase in nonfarm employment from a year earlier was solid, and up from the recent low of 1.3% in October. But revisions show a pronounced slowdown from the recent 2% peak in 2015. This is not surprising: This far into an expansion hiring should slow as demand levels off and qualified workers are harder to find; job growth has still been stronger than many experts thought possible. More important, output growth has remained solid; it was 2.3% in the fourth quarter of 2019, right in line with the average since 2013. This means firms are turning to efficiency and capacity to boost sales, which is why productivity growth has accelerated, a good sign for the long run. Still, at 1.8% in the fourth quarter, productivity gains are historically modest, partly because growth has been brisk in sectors such as leisure and hospitality, where wages and productivity are low, but sluggish in manufacturing and mining where wages and productivity growth are high. —Greg Ip
The longest stretch of continuous job creation on record remains in place, by the skin of its teeth. Annual revisions the Labor Department issued Friday trimmed 55,000 jobs from February 2019’s payroll increase, leaving the month adding just 1,000 jobs. But a gain is a gain, and U.S. employers have added to payrolls every month since Oct. 2010, by far the longest run on record.
While the overall job streak is alive, the private-sector job streak is over. Take out government hiring and employers cut 6,000 jobs in February 2019—the first such drop since February 2010.
Overall, the latest annual revisions did little to change the big picture. Hiring was less than thought in 2018, offering a slightly dimmer view of a jobs breakout following the passage of tax cuts. But maintaining the pace of employment growth in a decade-long expansion has defied the expectations of many economists. —Eric Morath
January’s report may have gotten a boost from warmer-than-expected weather. The construction industry added 44,000 jobs, a relatively large jump for the sector. Of course, there’s also seemingly plenty of demand for construction workers as the industry works to meet rising demand. “The homebuilding sector has been challenged by labor shortages and high costs,” said the Mortgage Bankers Association’s Joel Kan.
Manufacturers haven’t been showing the same strength. Factories added 58,000 jobs in 2019, the second-smallest gain for the sector since the jobs recovery began in 2010. It was a sharp pullback from 2018 when 264,000 factory jobs were added. Combined, 2017 and 2018 marked the best two-year run for manufacturing jobs since the late 1980s. Manufacturers cut 6,000 jobs through all of 2016. Factories cut 12,000 jobs last month. —Eric Morath
One of the best signs in the latest report: rising labor-force participation. The share of the population working or looking for work reached a seven-year high. Among prime-age workers—25 to 54 years old, when school and retirement generally aren’t big factors—the share of the population with a job was the highest since 2001. “There still appears to be a pool of unutilized labor,” said AllianceBernstein economist Eric Winograd.
The flip side to an abundance of workers is softer-than-expected wage gains. Average hourly earnings rose 3.1% from a year earlier in January. That’s below their recent peak and less than many economists would expect in a tight labor market. “Wage growth is still slower than expected in an economy that has had historically low unemployment and remains the most important indicator to watch in 2020,” said Economic Policy Institute economist Elise Gould.
The solid January employment report offers another source of comfort for the Federal Reserve. Officials lowered rates three times last year after raising them four times in 2018 because of fears weaker global demand, amplified by trade uncertainty, might slow the U.S. economy more than expected. They also concluded the economy may not have been as strong in 2018 as initially thought. But since October, they’ve been in wait-and-see mode—and Friday’s jobs report offers little reason to change course. While officials are holding rates steady for now, they have signaled they see greater risks of surprises that could prompt them to lower rates than to lift them. The coronavirus is the latest example of such a development, Nick Timiraos writes.
WHAT ECONOMISTS ARE SAYING
“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. —Nick Bunker, Indeed Hiring Lab
“The first report of 2020 is a healthy one—showing that a possible redux of the roaring twenties updated for the 21st Century isn’t off the table yet.” —Daniel Zhao, Glassdoor
“Strong job creation and firming wage growth in January provided reassurance that the record-long economic expansion still has room to run. But this latest health report also points to a maturing labor market with 2019 job creation cooling to its slowest pace since 2011.” —Lydia Boussour, Oxford Economics
“The labor market remains robust and continues to be the key underpinning of economic growth, and there is no reason from the data to expect that to change any time soon.” —Eric Winograd, AllianceBernstein
“The new data show less of an acceleration in job growth in late 2018, and instead paint a picture of an economy where employment gains are gradually decelerating as labor market conditions tighten.” —Ryan Wang, HSBC
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