It’s the first Friday of the month, which usually means a BLS jobs report. However, since the government shut down for a few days that report won’t come out until next week. Luckily for us ADP came to the rescue yet again, with their January Employment Report.
Private Sector Employment Rose by Just 22,000 in January
That headline is depressing enough, but a closer look at thenumbers depresses us further.
- Economists were expecting employment to rise by 45,000, so this is way below forecast.
- December job growth was revised down to 37,000.
- Job growth in January would have been negative if it wasn’t for a 74,000 increase in education and health services. As we’ve mentioned before, since this sector is largely supported by the government it is not tied to the current economic climate, and therefore we shouldn’t get too excited by this number.
- The biggest job loss last month was in professional and business services, which shed 57,000 workers.
- All the January job gains were in firms with 50-499 employees. Companies with 500 or more employees reduced their employment by 18,000.
- Since this report only covers the private sector, thelarge reduction in federal government employment is not included in this report.
I can give you two findings in the report to be happy about. First, 14,000 jobs were added in financial activities. Since these tend to be high-paying jobs, it’s always nice when they’re adding workers. The second bit of happy news was in wages, which rose 4.5% year-over-year. That increase is significantly higher than the 2.7% rise in prices in the twelve months ending in December.
There were three other reports on the labor market released this week, which also had depressing headlines, but aren’t as bad as you might think. Here they are:
- US weekly jobless claims increase more than expected.
- Layoffs in January were the highest to start a year since 2009.
- Job openings sink in December to lowest level since 2020.
Here’s why you shouldn’t worry so much about these three:
- Jobless claims did rise, but only to 231,000. You may remember from last week’s column that initial claims have averaged about 360,000 since 1967, so this is still a historically low number.
- That second headline is a bit misleading as the data is on announced layoffs, not ones that have already happened. Remember that announced layoffs don’t always materialize, and even if they do, they can be negated by increased hiring in other functions of a company.
- While job openings are at their lowest level since 2020, at 6.5 million they are significantly higher than the 4.5 million average of the 20 years before Covid.
The best way to sum up the labor market remains “no hire, no fire.” We’ll see what the BLS report has to say next week, but remember that low hiring doesn’t mean a recession is around the corner. Economic growth is dependent on consumer spending, not on hiring. And since wages continue to grow faster than prices, consumers should be able to keep spending at least for now.
Let’s Go Seahawks
Just wanted to close this column by giving my pick for theSuper Bowl. I do think Seattle is the more complete team, but to be honest I am biased because:
- No New Yorker should ever root for a team from Massachusetts.
- As a Jets fan, I couldn’t be happier for Sam Darnold. Another in a long history of terrible personnel moves by the Jets.
Watch the Latest Episode of Greg Heym’s Crossing the Line: Why Are Americans So Down on Economy?
Leave a Reply