Surprise! Job creation rebounds in January as economy adds 225K

This caps off quite a week for the White House, which just saw its best polling numbers thus far largely driven by economic satisfaction. The Bureau of Labor Statistics reports that the US economy added 225,000 jobs in January, far above analysts’ estimates of 158,000, but the internals might tell an even better story. The workforce added almost 200,000 re-entrants from the ranks of the disaffected, finally returning to seek work in a boom economy:

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Total nonfarm payroll employment rose by 225,000 in January, and the unemployment rate was little changed at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in construction, in health care, and in transportation and warehousing. …

Both the unemployment rate, at 3.6 percent, and the number of unemployed persons, at 5.9 million, changed little in January. …

Among the unemployed, the number of reentrants to the labor force increased by 183,000 in January to 1.8 million but was little changed over the year. (Reentrants are persons who previously worked but were not in the labor force prior to beginning their job search.)

That flood of discouraged workers coming back into the workforce pushed the participation rates to years-long highs:

After accounting for the annual adjustments to the population controls, the civilian labor force rose by 574,000 in January, and the labor force participation rate edged up by 0.2 percentage point to 63.4 percent. The employment-population ratio, at 61.2 percent, changed little over the month but was up by 0.5 percentage point over the year.

The last time the labor force participation rate was 63.4% was in June 2013, four years after the technical recovery from the Great Recession began. The most recent time that the employment-population ratio hit 61.2% or higher was in November 2008, during the financial-sector meltdown that created the Great Recession. Both measures had been discounted ever since by claims that their lower numbers were the result of boomers going into retirement rather than an overhang of discouraged workers, an explanation that has been effectively mooted now.

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The only real discouraging note in this report comes from the manufacturing sector. It lost 12,000 jobs in January and its overtime fell by a tenth of an hour at the same time, which means that the issue is demand rather than a push toward productivity. Durable-good production fell and retail employment declined slightly as well, while construction remained static.

Otherwise, the signals all show green lights ahead. Wages grew by an annualized rate of 3.1%, well ahead of inflation, and even the revisions for November and December were mildly positive, adding 7,000 jobs to the previous reports. CNBC offers a very rosy take on the start to the new year:

An unseasonably mild January helped power the U.S. jobs market to more gains, with nonfarm payrolls rising 225,000 for the month, well above Wall Street estimates.

The unemployment rate ticked higher to 3.6%, but for the right reason as the labor force participation rate increased 0.2 percentage points to 63.4%, matching its highest level since June 2013, according to data released Friday by the Labor Department.

Economists surveyed by Dow Jones were looking for payroll growth of 158,000 and the jobless rate to stay at 3.5%, its lowest in more than 50 years. …

There was more good news for workers: Average hourly earnings rose 3.1% over a year ago to $28.44, ahead of estimates for 3% growth. That marked 18 consecutive months of wage gains above 3%, as the initially reported 2.9% for December was revised up to 3%.

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Wages have now grown above an annualized 3% each month for the last 18 months after remaining stagnant during the recovery. Consumers are feeling the glow of that already, and the Wall Street Journal projects a healthy year ahead as well:

January’s robust payroll gain points to a continued healthy labor market in a U.S. economic expansion now in its 11th year. Over the past three months, the U.S. economy added an average 211,000 jobs. Job growth was revised higher in the last four months of 2019.

Robert Jones, president of American Sale, an Illinois-based retailer of home-recreation goods such as trampolines and hot tubs, said his company will add more workers this year. He expects a low unemployment rate and solid economy to help spur spending on big-ticket items.

“When you have more demand, you have more to do, so you just need more people,” Mr. Jones said.

A strong labor market should help propel the broader economy, which was expanding at a moderate pace as 2019 came to a close.

Politically, this couldn’t come at a better time for Donald Trump. His polling numbers are rising, with Gallup recording his best ever, as voter perception of the economy improves and gives Trump credit for it. The sharp reduction in the overhand of discouraged workers has brought us back closer to the post-Reagan normal participation rate and well off the bottom of the post-Obama-recovery rates.

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And if it’s great news for Trump, it’s bad news for …

Moore’s correct about the slight bump in the unemployment rate, but the difference between 3.5% and 3.6% is so minimal that most people wouldn’t notice it at this point. The participation rate and wage growth measure the actual feel of employment levels, and that’s what voters are sensing now, too.

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