There’s mixed news on the labor front today, according to this morning’s payrolls report for January from the Labor Department. The unemployment rate fell to 9.0% last month from 9.4% in December—that’s good. But January’s private sector growth in nonfarm payrolls rose by a slim 50,000, down sharply from December’s revised 139,000 gain—that’s bad. Analysts say that snow kept a lid on stronger job growth. Perhaps, but the crowd is stuck singing a familiar refrain once again: Next month’s job report will be better.
“Job growth is also much stronger than the payrolls suggest,” says Eric Green, a strategist at TD Securities, via MarketWatch.com. He predicts that “payrolls will be much higher next month, and so will unemployment.”
Ward McCarthy, chief financial economist at Jefferies & Co, agrees. “This looks like quite a firm report once you get those frozen-out workers off the tables,” he tells Bloomberg.
Meantime, the Labor Department revised the last two years of employment data, but the changes don’t improve the profile of sluggish job growth of late. As the chart below reminds, private-sector payroll increases have been modest at best. Unfortunately, the trend seems to be weakening. The revised numbers show that last month’s net change in private payrolls was the smallest since last May.
The leading sources for the deceleration in overall private-sector job growth last month: an acceleration in the loss of construction jobs and a dramatic slowdown in the rise of services employment.
Spring can’t come too quickly for the labor market, but until stronger numbers arrive maybe it’s prudent to keep expectations in check. “One might be tempted to read something positive also from the fall in the unemployment rate from 9.4% to 9%,” notes Rob Carnell of ING via The Guardian today. But there’s still reason to stay cautious, he adds. “Despite a 117,000 gain in employment measured by the household survey in Jan, most of this fall in the unemployment rate was the result of a further 507,000 decline in the civilian labor force, which contributed most of the 622,000 decline in ‘unemployment’ this month. Moreover, adding to the sense that all is not entirely well with the US labor force, the average duration of unemployment continues to drift higher.”