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Jobs Report

Employers add booming 304,000 jobs in January, marking 100th straight month of employment gains

Hiring began 2019 on a strong note as employers added 304,000 jobs in January, marking a 100th straight month of payroll growth and defying the 35-day government shutdown, the U.S. trade war with China and a slowing global economy. 

The milestone extended the labor market’s record streak of job gains.

The unemployment rate, which is calculated from a separate survey of households, rose to 4 percent from 3.9 percent, largely because of the government shutdown, the Labor Department said Friday.

Economists surveyed by Bloomberg had estimated 165,000 jobs were added last month.

One mild disappointment: Employment gains from November and December were revised down by a total 70,000. November's was upgraded from 176,000 to 196,000 but December's blockbuster 312,000 was revised down to 222,000, which was still a strong showing.

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The economic reports for January have so far been a bit puzzling. While the readings have indicated slower growth, things were complicated by the long partial government shutdown.

A whirlwind of unusual factors likely skewed January’s employment totals, economists said. The shutdown wasn’t expected to affect the jobs total broadly, which derives from a survey of businesses and government agencies, because 420,000 federal employees worked without pay and the 380,000 who were furloughed are receiving paychecks retroactively, Labor said. However, the longest shutdown in U.S. history still may have crimped government hiring, Goldman Sachs said. And layoffs by the government’s private contractors probably suppressed employment by about 30,000, according to Morgan Stanley.

Warm weather in mid-January, when Labor conducted its employment survey, bolstered job gains in industries such as construction and leisure and hospitality, economists said. The number of workers idled because of bad weather was about 50,000 below the average of the past 10 January reports, says economist Jim O'Sullivan of High Frequency Economics. .

Also, industries such as retail, restaurants and warehousing sharply ramped up hiring of temporary seasonal workers in the past few months, likely resulting in more layoffs in January, according to Morgan Stanley and Grant Thornton.

Generally, the labor market was surprisingly robust in 2018, adding an average 223,000 jobs a month. But economists expect average monthly job growth to slow to about 165,000 or so this year as the trade fight and sluggish global economy take a bigger toll and the low unemployment rate spawns more worker shortages.

Wage growth

Average hourly earnings rose a modest 3 cents to $27.56, nudging down the annual gain from an upwardly revised 3.3 percent to a still healthy 3.2 percent.  

Pay increases generally have been picking up as employers compete to attract a smaller supply of workers, and they’re expected to approach 3.5 percent or higher by late 2019. The bigger raises eventually could spur faster inflation, posing a dilemma for the Federal Reserve. The Fed this week said it may be done raising rates for now in light of muted consumer price increases and volatile markets.

Industries that are hiring

Leisure and hospitality – which includes restaurants, bars and hotels – and construction both seemed to benefit from the mild weather. Leisure and hospitality led the job gains with 74,000. Construction added 52,000; health care, 45,000; professional and business services, 30,000; and retail, 21,000.

Manufacturers added 13,000 despite the Trump administration’s trade fight with China.

Labor force participation hits 5-year high

The share of American adults working or looking for jobs rose from 63.1 percent to 63.2 percent, highest since September 2013, as more Americans on the sidelines, including discouraged workers and retirees, streamed into an improved labor market offering more jobs and higher wages.

Eventually, the labor force participation rate is expected to resume its longer-term decline as millions of baby boomers continue to retire.

What it means

The January jobs report likely got a bit a lift from unusually balmy weather, but the total was impressive even after accounting for that. The shutdown pushed up the unemployment rate but had minimal effect on the payroll totals. The labor market continues to add jobs at a surprisingly brisk clip despite a low jobless rate that’s making it harder for employers to find qualified workers.

That’s partly because many Americans on the margins, such as discouraged and disabled workers, keep returning to the labor force to reap the benefits of better pay offers and plentiful jobs.

"We expect the labor market to gradually cool in 2019, but the combination of solid payroll gains, rising wages and falling unemployment rate will continue," says economist Lydia Boussour of Oxford Economics.

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