Paige Leonard speaks with a recruiter from a jewelry and gem company during the Gemological Institute Of America's Jewelry Career Fair in New York in this file photo from July 30, 2012. — Reuters pic
WASHINGTON, Feb 7 — US job growth accelerated in January, with unseasonably mild temperatures boosting hiring in weather-sensitive sectors, indicating the economy will probably continue to grow moderately despite a deepening slump in business investment.
The Labour Department’s closely watched monthly employment report today, however, showed the economy created 514,000 fewer jobs between April 2018 and March 2019 than originally estimated. The biggest downgrade to payrolls over a 12-month period since 2009 suggests job growth could significantly slow down this year.
Nonfarm payrolls increased by 225,000 jobs last month, with employment at construction sites increasing by the most in a year amid milder-than-normal temperatures, the government’s survey of establishments showed. There were also strong gains in hiring in the transportation and warehousing industry.
Economists polled by Reuters had forecast payrolls would rise by 160,000 jobs in January. Data for November and December was revised to show 7,000 more jobs created than previously reported. But employment gains are expected to slow in February as the coronavirus, which has killed hundreds in China and infected thousands globally, disrupts supply chains, especially for technology companies such as Apple.
The annual benchmark revisions to payrolls will attract attention amid concerns the Labour Department’s Bureau of Labour Statistics, which compiles the employment data, may not be fully capturing the impact on payrolls of President Donald Trump’s 19-month trade war with China, which has contributed to the longest downturn in business investment since 2009.
The downward revision in the level of employment suggests the government’s birth-death model, which it uses to calculate the net number of jobs from new business and closings, is faulty. Economists say payrolls have tended to be overstated when the trend in growth is weakening.
They say the downward revisions could impact financial markets’ assessments of the labour market.
The slowdown in job growth is blamed on worker shortages and ebbing demand for labour. Even though employment growth has slowed, the pace remains well above the 100,000 jobs per month needed to keep up with growth in the working-age population.
Unemployment rate rises
The government also introduced updated population estimates to its smaller household survey data, including employment and labour force participation. The unemployment rate is calculated from the household survey.
The new population controls meant that the January unemployment rate and other measures derived from the household survey were not directly comparable to December data.
The government, however, provided adjusted data, which showed the unemployment rate rising one-tenth of a percentage point to 3.6 per cent in January. The labour force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose two-tenths of a percentage point to 63.4 per cent last month, the highest since June 2013.
The tightening labour market is steadily driving up wages. Average hourly earnings increased seven cents, or 0.2 per cent, last month after gaining 0.1 per cent in December. That lifted the annual increase in wages to 3.1 per cent in January from 3.0 per cent in December.
Federal Reserve Chair Jerome Powell said last month the United States’ low labour force participation, relative to those of other advanced economies, “represents more lab or supply, and it may be holding down wages.”
Still, wage growth is probably enough to support a decent pace of consumer spending and keep the economy chugging along. The economy grew 2.3 per cent in 2019, the slowest performance in three years, after logging 2.9 per cent growth in 2018. Growth this year is seen around 2 per cent, just above the 1.8 per cent that economists say is the speed at which the economy can grow over a long period without igniting inflation.
The construction industry added 44,000 jobs in January, the largest since January 2019, after payrolls increased by 11,000 in December. Employment in the transportation and warehousing industry accelerated by 28,000, driven by gains in the hiring of couriers and messengers.
Payrolls in the leisure and hospitality sector increased by 36,000 jobs.
But manufacturing employment declined by 12,000 jobs after falling by 5,000 in December. The industry has been the hardest hit by the US-China trade war. Though Washington and Beijing signed a Phase 1 trade deal last month, US tariffs on US$360 billion of Chinese imports, about two-thirds of the total, remained in place.
Manufacturing is also being squeezed by Boeing’s suspension last month of production of its troubled 737 MAX jetliner. Boeing’s biggest supplier, Spirit AeroSystems Holdings Inc, said last month it planned to lay off more than 20 per cent of the workforce at its Wichita-Kansas facility because of the 737 MAX production suspension.
Government payrolls rose by 19,000 jobs in January, with some hiring for the 2020 Decennial census. — Reuters