Job market starts 2024 with a bang

Happy Groundhog Day! No six more weeks of winter and no labor market slowdown? Perhaps but Punxsutawney Phil does not have the best track record. Today, the Bureau of Labor Statistics (BLS) released their first read on January’s labor market along with a slew of revisions, showing stronger labor market conditions than originally documented in 2023 as well as a pickup in January (seasonally-adjusted, of course). 1.? Nonfarm payrolls increased by 353K with sizable revisions in December (+117K) and upward revision most months back to January 2023 due to annual benchmark (and seasonal adjustment) revisions. While, today’s net job growth numbers are well beyond what was expected and indicate solid job growth, it is important to note that 1) we received annual historical revisions today that indicate stronger growth most months over the last year and 2) there was upside risk to January’s payroll growth like last year due to technical factors. A notable increase in payroll employment growth occurred in Professional and Business Services, adding +74K to payroll employment after a lackluster 2023. While Healthcare and Social Assistance and Government continued to add a sizable share of jobs, it is encouraging to see job growth a bit more widespread in January. 2.? Unemployment remained at 3.7% with no revision in recent months, signaling that the labor market remains solid even with a recent, slight increase in continued claims. There was little change in the composition of unemployment from December to January (though this comparison is distorted by revisions to population controls). Labor supply growth continues to appear to have flatlined, but we will need to see additional months of data with new population controls to be sure. 3.? Wage growth (measured by average hourly earnings) rose at an annualized rate of 7.4% (4.9% for private-sector production and nonsupervisory employees), which accelerated significantly from last month and runs well above growth consistent with the Federal Reserve’s 2% inflation target. However, this acceleration in average hourly earnings growth is likely driven in large part by strong job gains in Professional and Business Services and weak gains in Leisure and Hospitality. 4.? Employment at Temp Agencies saw its first increase in a year (+3.9K), however we must take caution in interpreting this gain as an early signal of labor market reacceleration given January’s unique upside risk due to seasonal adjustment factors. While we expected today’s jobs numbers to come in above consensus, today’s numbers are well beyond what was expected. Today’s report is likely to solidify views inside and outside the Federal Reserve that the labor market is solid, and the Fed can afford to hold rates higher for longer while building confidence that inflation has returned to its annual 2% target and will stay there. #jobsreport #linkedin

Jan Payrolls: Starting the Year with a Bang (this post is based on https://lnkd.in/eKFBeqDK) The January jobs report released today suggests a strengthening of the U.S. labor market. The January jobs report released today included the annual benchmark revision of the establishment survey as well as the annual population adjustment to the household survey. Payrolls in the establishment survey were up by a very strong 353,000 persons in January, up from an equally strong 333,000 increase in the preceding month (which was upwardly revised from 216,000 persons). Benchmark and seasonal adjustment revisions meant that the average monthly payrolls growth was revised up by about 33,000 persons for 2023 H1, and by about 27,000 persons for 2023 H2. The unemployment rate remained unchanged at 3.7% in January, with household employment growth in January equal to -31,000 persons and the labor force shrinking 175,000 persons. The smoothed trends suggests accelerating payrolls growth well above the breakeven pace needed to keep the unemployment rate around 3.7% over the next 6 months (first chart). We can use data on total and short-term unemployed and employed persons to estimate likelihood a person leaves a job in a month (job-separation rate) as well as the likelihood a person moves out of unemployment in a month (job-finding rate). The job-finding rate fell from a probability a person no longer is unemployed in a given month equal to around 55% in early 2023 to close to 45% by the summer, likely reflecting a significant decline in hiring by firms as the supply of workers increased (second chart). However, since the summer the job-finding rate increased again towards a probability of around 54% that a person leaves unemployment in a given month by year-end 2023. With a more tempered labor force growth going forward, increasing job-finding rates likely will keep the labor market on a strong footing in the near term. Finally, average hourly earnings accelerated notably in January to 0.6 % month/month compared to 0.4% in both December and November. This coincided with a similarly large drop in hours worked with average weekly earnings essentially unchanged over the month (final chart). One possible cause of the offsetting moves in hours worked and hourly earnings, might be due to severe weather circumstances in January. According to the household survey the number of persons absent from work owing to bad weather was the highest for any January since 2011; a data quirk likely not picked up by seasonal adjustment. The strong labor market means that the Fed will be patient in determining the start date of rate cuts to further assess whether inflation is indeed easing along a medium-term path back to 2%. We are not going to see a move toward policy rate cuts before mid-2024 (https://lnkd.in/emUHj6ed). More details see https://lnkd.in/eKFBeqDK #jobsreport #wages #federalreserve

? Strong jobs report provides Groundhog Day reality check on rate cuts ? Like Bill Murray in Groundhog Day, investors find themselves reliving the same day over and over, needing to adapt and find a way to turn the situation to their favor. ? In this case, the “situation” is the forecast-defying labor market. Once again, the U.S. #employment situation confounded market expectations, with this morning’s nonfarm payrolls report for January surging past forecasts (+355K jobs added, more than double the +170K consensus). Unemployment held steady at 3.7% versus the expected 3.8%. And average hourly earnings grew a robust +0.6% for the month, double expectations, taking year-over-year wage growth to an above-forecast +4.5%. ? While this is good news for the U.S. #economy, it has financial #markets wondering (again) when the Federal Reserve (Fed) will be able to pivot to rate cuts. Hopes for a March cut had all but evaporated after last week’s hawkish Fed meeting, and the latest labor market only confirms the demise of that overly optimistic narrative. ? With that in mind, investors can accentuate the positive by allocating to asset classes beyond equities (e.g., real estate) that are typically resilient in a stable rate environment and have relative valuation advantages with the potential to outperform cash. ? I had the opportunity to discuss these topics on this morning’s edition of CNBC Squawk Box. Special thanks to host Becky Quick for inviting me to participate in the discussion on payrolls, the trajectory of the economy and market opportunities. You can find this morning’s episode here: https://lnkd.in/gHf-wjPz ? Does today’s jobs report alter your view on when the Fed will begin to cut rates? ? #LITrendingTopics

An absolute blowout jobs report in the US, with robust growth in employment at the start of 2024 while December’s number was revised sharply up too. On average, employment increased by an average of 255K a month in 2023, impressive given the tight monetary backdrop. There is a bit of inconsistency in the overall data because a separate household survey showed a decline in employment, and hours worked have declined. But can’t argue that the big picture is one of resilience. This adds to the chance of a soft-landing, as inflation has managed to come down without much pain in the labour market. On the flip side, wage growth has accelerated more than expected which will remain a contentious point for the Federal Reserve. Though it's debatable whether this is one off and just due to lower hours worked. Higher wage growth great for workers as rising wages and slowing inflation means higher real wage growth that supports purchasing power. This feeds back into the soft-landing story. While recent key inflation measures made good progress, the strong wage growth complicates the path of rate cuts going forward due to risk of inflation re-emerging. Overall, we think inflation will continue to slow given the largest component is rent and it is on track for meaningful moderation in 2024. The chance of a March rate cut has decreased substantially after push back from Fed’s chair and today’s data. However, markets continue to see rate cut starting in May with a total of 5 cuts in 2024. We believe it is more likely the Fed cuts in the 2H 2024, but anyway the direction of travel matters more than trying to speculate on the exact meeting when the cut occurs. US dollar and bond yields soared while equities rallied (more a strong corporate earnings story I think but soft-landing trend helpful of course). I was on Sky News this afternoon to discuss the US jobs data. RBC Brewin Dolphin #USjobs #USnonfarmpayoll #USeconomic #markets #economy #Linkedinnews

I was recently asked a question about the signposts that would indicate the US #economy is weakening and is likely to enter a #recession. My response was that, first and foremost, I look for a visibly deteriorating #labor market (less hiring, more layoffs, higher #unemploymentrate, etc.), which would then cause the US consumer to pull back on spending in a meaningful way. Since consumers account for two-thirds of GDP, any notable slowdown in consumption activity would quickly reverberate throughout the entire economy. Alex's Analysis: This morning's jobs report from the Bureau of Labor Statistics, which showed that the US economy added 353,000 jobs and the unemployment rate held steady at 3.7% in January, is a data point which indicates that's not happening right now. However, the news around the labor market has been contradictory lately to say the least. We've seen layoff announcements increase, especially at larger publicly traded companies (see rising unemployment claims and a worse-than-expected ADP report), and circumstantial evidence suggests hiring plans for 2024 have been tempered or outright frozen at many businesses. Furthermore, at the macro level, I feel we're setting ourselves up for disappointment based on the baked-in soft landing expectations that are pervasive right now. As such, other signposts that I'm paying attention to include how the FED handles #interestrate policy (keep in mind that higher interest rates usually take about 2 years to fully reverberate through the economy), commercial real estate market woes which should become more evident in 2Q24, and geopolitical developments (broader war in the middle east anyone?) that have the potential to derail any soft-landing scenario. My best advice to you at this time would be to stay vigilant, pay close attention to key data as it comes in, have contingency plans in place for various scenarios, and be ready to act when the time calls for it.

Since the end of December, I have pointed out that financial conditions have eased considerably in the US and that the economy is accelerating instead of slowing down. Some data that just came out confirmed my expectations. Let's start with the blockbuster job report that was just released. ?? Non-farm payrolls came in almost two times the consensus estimate. ?? Month Over Month Average Hourly Earnings came in at 0.6% vs the consensus forecast of 0.3%. If we annualize this number, we are talking about a 7.2% annualized wage increase, three times higher than the Fed Inflation Target. ?? I also looked at the Atlanta Fed's first projection of Q1 GDP; it came in at more than 4%, double our country's Long-term Real GDP growth rate. These data take a March Rate Cut out of the table, but I am also less sure that the Fed will need to cut rates in May. If numbers are this strong during the next two to three months, I question whether the Fed will have to cut interest rates this year. One point I want to underline is that, at first glance, the monetary policy is restrictive, but we also need to point out that the fiscal policy is still very accommodating. This is CFA Level I study material; in a scenario where monetary policy is restrictive and fiscal policy is accommodative, an economy should not be guaranteed to slow down. Not many market participants have realized that! Please feel free to comment. I always value the opinions of my followers! #economy #economics #portfoliomanagement #investing #interestrates LinkedIn #markets #finance

Another?blowout?jobs gain! ???? The US #economy added 353,000 jobs in January, far exceeding expectations. And we caught Jonathan Levin's reaction to the news on our live stream ?? Watch Jon and Nick Colas provide full analysis of the #jobsday data for Bloomberg Opinion: https://lnkd.in/gpTcgB9p

The US job market continues to astound me with its resilience. January's BLS jobs report wasn't quite perfect, but it was very good. 1/ Nonfarm employment increased by a robust 353K in January. 2/ Moreover, this report incorporated the BLS's annual revision to the establishment survey, which indicated that employment growth over the past year has been stronger than previously believed. (I think hunches were for a revision in the opposite direction!) Employment growth seems stable and far above the recessionary threshold, at least for the time being. 3/ The other half of the report - from the household survey - was not quite as robust, but still heartening. The unemployment rate was steady at a very low 3.7% for the 3rd consecutive month (and has not increased since August). The share of prime working age Americans with a job ticked up to 80.6%, though it's a little below last summer's cyclical peak of 80.9%. 4/ Unseasonally bad weather significantly impacted the hours and earnings part of the report. The average workweek plunged. Historically, this has at times been a recessionary indicator, but it was coupled with data showing spikes in absences and part-time work induced by bad weather. Presumably the workweek will rebound somewhat if weather in February is less bad. 5/ Bad weather also probably impacted wage growth, because many workers are salaried: if they work fewer hours or are absent from work, pay per hour increases. To the degree this is the case, I'd anticipate the spike in wage growth we saw in January to unwind. 6/ One soft note in the data: people working part-time hours for economic reasons, which rose to its highest level in over 2 years. Normally this would be a (mildly) bad sign, but it might be downstream of the bad weather. We'll see next month! 7/ All those scary layoffs in the news are not showing up in the data, at least not yet. The share of unemployed "due to permanent layoff" is a little higher than it was 18 months ago, but has not budged recently. 8/ Biggest industry job gains: health care & social assistance (+100K), professional & business services excluding temp agencies (+70K), retail (+45K). There was even a monthly gain in information services (+15K), which is where a lot of the recent layoffs have been concentrated. The only sector to experience job losses was mining and logging (-6K).

This job market demands that you take it seriously. Employers added 353K jobs in January, and revisions show the U.S. economy added about 3 million jobs in 2023 alone. To illustrate just how historically rare that is: Not since 1999 have employers created that many jobs in a year, excluding the post-pandemic rebound in 2021 and 2022. The report had many other great features, too. Job gains were broad-based across many sectors — not just retail or food services. Health care and social assistance led the charge, and professional and business services also added another 74K jobs last month. Hopefully helping Americans feel more positive about their finances, wage growth rose 4.5%, well above the BLS's other measure of consumer inflation: 3.4%. The Federal Reserve might not be so celebratory. Almost all officials expect that they'll be able to cut interest rates this year, and policymakers noted at their January meeting this week that the risks of doing too little are more evenly balanced with the risks of doing too much. Translation: Officials aren't now just squarely focused on keeping prices stable but they also want to avoid wrecking this juggernaut of a job market. Yet, Fed Chair Jerome Powell threw cold water on investors' hopes that a rate cut could come as soon as March — and so did this January jobs report. Even despite Powell's pushback, investors kept the odds of a cut in March at about 40%. That's since fallen to less than 20%, thanks to the latest employment report. How does the Fed judge positive and surprising data, if it's balanced with slowing inflation? An organization that frequently refers to itself as "data-dependent," the Fed might still find it tough to abandon their fears that inflation will reaccelerate, as the financial system remains strong. What do economists say about the outlook for employment in the year ahead? Read our latest survey from?Bankrate:

??THE JANUARY JOBS REPORT?? (alt title: holyyyyy hiring!) ??Hiring was way stronger than expected ??December payrolls were revised way higher ??Wage growth picked up a lot too ??No recession (def not), but no rate cuts now...? Wow. Where to start… Hiring was SUPER strong in January, led by job gains in professional/business and the education/health sectors. December payrolls were revised much higher, too. We’re now looking at two straight months of 300K+ jobs added. For context, 183K was the average payrolls gain in the 2010s. Some of this could be revised away – January has been a weird month for jobs data recently (chart below). But I think it’s fair to say the US economy is in beast mode. No way around it. Add in a flurry of market-manifested rate cuts, and you have a good setup for a strong Q1. Will this gangbusters economy spark another inflation crisis, though? That’s what the market thinks, and it’s a logical step. Monthly wage growth accelerated at the fastest pace since March 2022. I’m not so sure, though. Wage growth was largely a function of fewer hours worked last month (average hourly earnings = total wages paid out/hours worked). The average workweek dropped the most since January 2022 – or the Omicron COVID breakout. That’s a little too sus to take seriously. The job market is strong. We’ve known that for a while. And honestly, that’s what matters most to the average investor just trying to build a nest egg. The Fed is attentive & inflation is back at 2%. Right now, your biggest worry is a recession. And we’re nowhere near that.