In what was a disappointment for many, Friday’s release, by the Bureau of Labor Statistics, of the January Jobs Report showed only a gain of 151,000 jobs, far less than the 191,000 that economists and government officials had predicted. One bright spot in the report for many was wage growth, something that had been lacking in the previous month’s rosier reports.
The unemployment figure, the one that gets the most attention, is the lowest that it has been in 8 years, received accolades from President Barack Obama, who trumpeted the fact that this report showed 71 straight months of private-sector job growth. He also said, “The United States of America right now has the strongest, most durable economy in the world.”
As pleased as Obama was with the figures, another additional area of concern, besides wages, is the low rate of labor participation by the workforce (the share of the population either working or actively looking for work) which is only 62.7. Some attribute this to various reasons, including those who have given up looking for work, or are involuntary part-time workers.
As seen, the best news was for wages; average hourly earnings rose by 12 cents in January, to $25.39. showing an overall increase of 2.5 percent, which pleased some observers, and brought relief to many job seekers. Diane Swonk, an independent economist in Chicago told The New York Times that this was “a move in the right direction,” despite the need for more sustained growth to make up for years of stagnation.
Areas that saw growth were consistent with earlier months, and they were led by manufacturing with an increase of 30,000 jobs, a boon for blue collar workers seeking better paying jobs. The report also noted that losses that did occur were “in private educational services, transportation and warehousing, and mining.”
Michael Wenz, associate professor and coordinator in economics at Northeastern Illinois University in Chicago, said in an emailed comment, that “it seems like we’ve finally gotten to the point where increases in labor demand are showing up in wages, rather than employment. It also looks like we might have hit the bottom for the labor force participation rate after a decade of declines, even as the unemployment rate was dropping.”
For many, this report indicates that the Federal Reserve is in line for another rate increase, especially considering the mix of increased pay, a now decreased trend in hiring, plus the downward pressure on prices from a strong dollar. Predictions, as well as desires, for some, are that any further increases will occur in March. Supporting this prediction is Wenz, who says, “I think this jobs report makes it slightly more likely that we’ll see an increase in rates in the coming months. Wage pressures often lead to inflation pressures, and the unemployment rate is probably below the natural rate, so this shifts the balance toward tightening. Still, global concerns seem to be an increasing drag and we’ve got some more data before the fed has to make a decision.”
Overall, economists, are scaling back their predictions of GDP growth, reported The Los Angeles Times, who noted they “began the year forecasting GDP growth of 2.5% or higher for 2016, have ratcheted back projections to 2% or less, also in part because of tighter credit conditions and an undesirable buildup of inventory.”
Reaction from the market was not good, and as CNBC reported, “stocks closed sharply lower on Friday amid a massive drop in technology stocks and as mixed U.S. employment data raised concerns the Federal Reserve may raise rates this year.”
Yet, others urged caution, and even expressed optimism: “This is a classic example of why the headline looks worse than the actual report,” said Art Hogan, chief market strategist at Wunderlich Securities. “The key components of this report were positive.”
Taking the numbers even further was Peter Cardillo, “It’s all about that wage number, and that the 151,000 number is still indicative of growth,” said Peter Cardillo,chief market economist at First Standard Financial., who said, much like Wenz, that wages “could be a sticking point for the Fed.”
It the January report was disappointing in some areas, such as job growth, or the flaccid labor participation rate, its increase in wages gave hope to many like Secretary of Labor, Thomas Perez, who said, “Although this steady progress on employment and wages is encouraging, we still have more work to do to ensure that more people can share in the prosperity they are helping to create.”