U.S. Jobs Report Disappoints Even as Unemployment Rate Falls
U.S. Payrolls Rise Less Than Forecast After Bigger December Drop
(Bloomberg) -- The recovery in the U.S. labor market disappointed for a second month in January with only modest job growth, highlighting the persistently difficult prospects for millions of unemployed and bolstering calls for more stimulus.
Nonfarm payrolls increased by just 49,000 after a downwardly revised 227,000 December decrease, according to a Labor Department report Friday. The jobless rate fell to 6.3%, reflecting a pickup in the number of employed and more people having left the workforce.
The January data may strengthen the case for another sizeable pandemic relief package. President Joe Biden has proposed a $1.9 trillion package, but many Republicans prefer to hold off on more assistance and wait for the December $900 billion aid package to filter through the economy.
“Without further aid our economy is going to continue to struggle,” White House Council of Economics Advisers member Heather Boushey said in an interview on Bloomberg Television after the report. “We need to continue to act and we need to do so quickly.”
Private payrolls rose by only 6,000 last month, restrained by job cuts in retail trade, transportation and warehousing, and leisure and hospitality, while other industries saw only modest gains. The latest jobs figures put a dent in a recent string of stronger economic data, including growth in manufacturing and home construction.
At the same time, the report included some bright spots. Americans are working longer hours and employment at temporary-help services jumped the most in three months, which may foreshadow a pickup in hiring in coming months.
Average weekly hours rose to 35, the highest in data back to 2006. Payrolls at temporary-help services climbed almost 81,000.
The report “shows a job market that is treading water,” Bank of America Corp. economists Joseph Song and Alexander Lin said in a note. “But there are some nascent signs of better things to come.”
The median estimates in a Bloomberg survey of economists called for a 105,000 gain in payrolls and an unemployment rate of 6.7%. Stocks rose after the report, the yield on the 10-year Treasury note climbed and the dollar slipped.
Pandemic-Stricken Year
The economy lost 9.3 million jobs in 2020, according to revised government data.
Restrictions on activity and businesses have eased, but fears of more contagious virus variants may curb consumer activity. Pandemic-sensitive sectors like leisure and hospitality will likely remain depressed until widespread vaccinations allow for robust spending on services.
Weak Industry Breakdown
- Leisure/hospitality payrolls fell 61k after 536k drop in Dec.
- Health care/social assistance fell 40.8k
- Retail trade declined 37.8k
- Transportation/warehousing dropped 27.8k after 24.1k fall
- Manufacturing fell 10k in January
“The January data raise concerns that the weakness which was assumed to be concentrated in sectors like leisure and hospitality may be more widespread,” Bloomberg Economists Carl Riccadonna, Yelena Shulyatyeva and Eliza Winger said in a note.
When it comes to pay, average hourly earnings rose 0.2% from the prior month and increased 5.4% from a year earlier. These figures have been challenging to interpret during the pandemic given the scale and distribution of job losses and gains.
And in a sign of challenges ahead, almost 40% of the unemployed have been out of work for 27 weeks or more. That group, known as the long-term unemployed, was little changed from December at a little more than 4 million.
Digging Deeper
- Unemployment rate would have been 0.6 percentage point higher if misclassified workers were included among unemployed
- Jobless rates declined in January for White, Hispanic and Black Americans; The unemployment rate rose for Asian Americans. Read more here
- The participation rate for women age 25 to 54 was unchanged at 74.8%, still significantly below pre-pandemic levels
- The U-6 rate, also known as the underemployment rate, fell to 11.1% from 11.7%. (Unlike the headline unemployment rate -- or U-3 rate -- the U-6 includes those who are employed part-time for economic reasons and those who have stopped looking for a job because they are discouraged about their job prospects)
- The employment diffusion index, a measure of the breadth of hiring across private industries, dropped to 48.1 from 61.9. The January figure is the lowest since April
- Average weekly hours for non-supervisory workers rose to 34.4 in January, the longest workweek since 2000
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