U.S. January Employment: What You Need to Know

Data provides first look at jobs market in 2017

The January jobs report was rather benign, but that is just what stock-market traders wanted, as markets rallied following the Friday-released report. It further reduced the odds of a March rate increase, coming after an FOMC meeting conclusion that was noncommittal on when the Fed will next hike rates.

January Nonfarm Payrolls: 227,000

Expectations: 175,000

What fed the data: Increases compared to the December were noted in retail trade (up 46,000) after little change in December, putting the 12-month increase at 229,000 jobs.

Construction also increased, rising 36,000 in January as the sector added 170,000 jobs over the past 12 months.

Financial activities (up 32,000) and professional and technical services (up 23,000) increased. Financial activities saw an average monthly rise of 15,000 jobs in 2016 while professional and technical services gains were in line with the monthly average seen in 2016.

Mining continued its slow recovery, with jobs up 13,000 over the past three months, but that still is a very small portion of the job losses the sector suffered since September 2014.

Job gains the past three months have averaged 183,000.

January Unemployment: 4.8%

Expectations: 4.7%

What drove the rate: The labor force participation rate rose to 62.9 percent after having been at 62.7 percent the prior two months. The number of unemployed was at 7.635 million, up from 7.539 million in December but down from 7.829 million in January 2016.

The broad measure of unemployment and underemployment (known as U-6) was at 9.4 percent for the month, the highest since October. The data signaled 24.4 percent of those unemployed had been out of work longer than six months.

Wage growth was noted, up 3 cents at $26 per hour, down from the 6-cent rise in December. Year-over-year, wages are up 2.5 percent compared to a 2.9-percent annual increase in December.

Revisions put November nonfarm payrolls at up 164,000 (204,000 prior) and December at 157,000 (156,000 prior) for a net reduction of 39,000 jobs for the two months.

Comments: The report came in with much more job growth than expected with the unemployment rate increase likely due to more folks coming back into the jobs market. The increase in the labor-force participation rate was notable, but still does not move that indicator far from the multi-decade lows it has seen for several years. The concern point in the data for the Fed will be wages. That had been moving higher, backing up Fed expectations for a tightening labor market. But wages failed to jump much even as several states put higher minimum-wage levels in place to open the year. That already has translated into tempered expectations for a rate increase in March and June based on Fed funds futures – 63-percent for June (69 percent Thursday) and now just 8.9 percent for Mach (18 percent Thursday).

US government bonds and the US dollar index have both declined in wake of the data while stock futures were pointed to a higher open.

Overall this continues the trend of a solid but not awe-inspiring level of jobs created, but wage figures are a point for hesitation by the Fed. We will hear from Chicago Fed President Evans – a 2017 voter – so he will be the first Fed voice after this report. We have three Fed speakers on the schedule next week – Philadelphia’s Harker (2017 voter) and St Louis Fed’s Bullard along with another appearance by Evans. But the conclusion thus far is March is likely off the table for a rate rise at this point.

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