U.S. Adds Over 300K Jobs in January

Unemployment ticks up due to government shutdown

Roy Maurer By Roy Maurer February 1, 2019
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U.S. Adds Over 300K Jobs in January

​The 35-day federal government shutdown didn't stop the labor market's historic streak of job gains, according to the latest report from the Bureau of Labor Statistics (BLS).

Employment rose by 304,000 jobs in January, smashing economists' expectations and marking the 100th straight month of positive job growth. "The completely unexpected continued surge in jobs creation—almost double what was expected—showed that the broader economy wasn't substantially affected by the government shutdown, at least in the short term," said Michael Farren, a research fellow at the Mercatus Center at George Mason University in Arlington, Va.

"The job market weathered the government shutdown well," said Mark Zandi, chief economist at Moody's Analytics. "Despite the severe disruptions, businesses continued to add aggressively to their payrolls."

Moody's and the ADP Research Institute came closer to the BLS findings than other forecasts, reporting Jan. 30 that private-sector employment grew by 213,000 jobs in January, based on ADP payroll data from over 400,000 organizations in the U.S. Other economists had projected around 165,000 new jobs in January.

BLS job gains in December 2018 were revised down by 90,000, but the 223,000 average monthly jobs created last year remains significantly above the pace of monthly job creation in 2016 (193,000) and 2017 (179,000).

The continued strength of hiring at this stage in a recovery is unprecedented, said Martha Gimbel, research director for Indeed's Hiring Lab. "But these strong jobs numbers, while providing comfort about the strength of the economy, should not distract from the very real hurt that many workers suffered during the shutdown," she added.

Julia Pollak, a labor economist at online employment marketplace ZipRecruiter, pointed out that employment gains in January were lower than they would've been had the shutdown not occurred because many businesses were unable to complete planned hires. "According to the results of a ZipRecruiter survey of 200 employers, the government shutdown stalled private sector hiring due to the suspension of E-Verify and delays to background checks," she said.

Pollak added that it's unlikely "that we will see a recession in 2019—the large over-the-month employment gain of 74,000 in leisure and hospitality and over-the-year increase of 410,000 in that category show that consumer confidence and consumer spending remain high."

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Hospitality, Construction Lead Sectors

The BLS reported solid job gains across industries in January.

Leisure and hospitality employers led the way, followed by construction (52,000 jobs), health care (42,000 jobs), professional and business services (30,000 jobs), transportation and warehousing (27,000 jobs), and retail (21,000 jobs).

"Midsized businesses continue to lead job creation; however, the share of jobs was spread a bit more evenly across all company sizes last month," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

The federal government even grew during the shutdown, adding 1,000 new jobs in January. Federal employees on furlough during the shutdown were counted as employed in the BLS reporting because they worked, received pay or will receive pay for the reporting period.

Furloughed Workers Turned to Part-Time Work

The unemployment rate in January rose slightly to 4 percent, up from 3.9 percent the month before, likely stemming from furloughed federal workers identifying themselves as temporarily laid off.

"The number of workers on temporary layoff increased and the unemployment rate was correspondingly higher as a result," Farren said.

In addition to an increase of 175,000 workers who reported short-term unemployment, there was also a big jump in part-time employment. January saw an increase of 490,000 people who said they were working part time for economic reasons.

"The large jump in workers working part-time for economic reasons is where the government shutdown shows most clearly, as workers who were struggling financially may have had to take on part-time work to make ends meet," Gimbel said. "Over the course of the shutdown we saw job search rates for affected workers jumping quite sharply, showing that they were looking for opportunities, including part-time work, more intensely as the shutdown went on."

She added that the unemployment rate for government workers hit 2.6 percent—almost 20 percent higher than it was in the last two years at this time.

The rise in January's unemployment rate was also due in part to an increase in the labor force participation rate, which climbed to 63.2 percent from 63.1 percent. "More Americans were pulled off the sidelines of the economy into jobs last month," said Andrew Chamberlain, chief economist at Glassdoor. "Big demographic shifts are pulling down workforce participation as Baby Boomers retire, so any steadying or upward movement is a sign of a robust hiring market attracting new talent."

Pollak pointed out that the prime-age employment-population ratio continued its steady rise to 79.9 percent, up from 79.0 percent a year ago.

Josh Wright, chief economist for recruitment software firm iCIMS, based in Holmdel, N.J., said that even after all the robust hiring of recent months, there may be room for growth in the labor market. "The recent acceleration in wage growth has coincided with a rise in prime-age labor force participation," he said. "This is the strongest evidence in favor of residual slack in the labor market."

Wright explained that employers may not be facing a labor shortage as much as a need for upskilling workers. "A lack of skills is different from a lack of people," he said. "Shortages for certain technical skills may be real, even if the solution is just for employers to hire people and put more effort into training them. That requires nonwage labor expense but drives up productivity. The lack of investment in workers could help explain why labor productivity has been so low."

Wages Continue to Rise

Average hourly earnings increased 3 cents in January to $27.56, the sixth-straight month that year-over-year wage growth was at or above 3 percent. Earnings rose by 85 cents over the year.

"Wage growth remained strong at 3.2 percent year-over-year," Pollak said. "For example, wages grew for 5.6 percent for production and nonsupervisory employees in construction, 4.9 percent in retail, 4.7 percent in leisure and hospitality, 4.2 percent in mining and logging, and 3.6 percent in trade, transportation and utilities."

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