Manufacturing and wages stood out as bright spots in January’s jobs report
On Friday, Feb. 5 the Bureau of Labor Statistics released its monthly employment situation report for January, which is considered the bellwether for the health of the labor market. The report was mixed, but key sectors saw nice improvements.
The U.S. economy added 151,000 jobs in January compared to 262,000 the previous month and below predictions of 200,000. The sector with the strongest job growth at 58,000 jobs was retail trade followed by food services and drinking places with 47,000 jobs added and health care with 37,000 jobs added. The weakest sectors for job growth in the U.S. were construction, wholesale trade and government.
Even though the overall job growth was below expectations, there were a few bright spots in this report. The unemployment rate fell to 4.9%, from 5% in December and the labor force participation rate, or the percentage of people who are working or seeking work, ticked up slightly to 62.7%. Average hourly wages for employees on private nonfarm payrolls increased by 12 cents to $25.39.
My overall take on this report
This report had a bit of mixed news for the U.S. economy. As we know, the BLS is a lagging indicator for the economic outlook and it was expected that we would see a much lower number than the December job report which was revised to 262,000, but unfortunately the January jobs report missed expectations. However, it is important to dig much deeper into than the headline number of this report. There were quite a few bright spots but also some areas of concern, which could cause the Federal Reserve to hold back from another interest rate hike in March. Though we did not see robust job growth across all sectors, we did see a surprise of 29,000 jobs created in the manufacturing sector. This particular sector has struggled over the past few years and was not expected to have such a strong month of job growth.
In addition to the positive surprise in manufacturing, we finally saw some movement in average hourly wages increases. Wages have been rather flat throughout the recovery and that certainly impacts consumer spending and GDP. The normal wage growth through a recovery period is usually 3% to 4% and this report showed we are finally getting some traction. We also saw the unemployment rate tick down to 4.9% and we saw an increase of people participating in the workforce with the labor force participation rate increasing to 62.7%. Sometimes, we see the unemployment rate tick down when people drop out of the workforce, however both of these indicators moved in the right direction.
The big surprises
Unfortunately, only 9,000 jobs were created in the professional and business service sector. This has been one of the best performing sectors over 2014 and 2015 and certainly is a concern in this report. We also saw the temporary sector cut over 25,000 jobs. This number does concern me because employers will let temporary workers go first and then layoffs can follow.
The takeaway for recruiters and job seekers
There are many different factors impacting the economy and the employment market and even though this wasn’t a strong job report we need to be reminded that there are many job opportunities out there and skills, education and experience are essential in this market. It is important to focus on the sectors and industries that have the most growth and opportunity. For example health care and information technology tend to be the hottest areas and have all different types of roles available from accounting, to marketing and professional roles.
What I’m looking for in the next report
Based on volatility in the market, CEO confidence and recent layoffs in many industries, I would expect job growth will continue to be a challenge for the next few months. However, there are over 5 million job opening in the U.S. and employers are looking for top talent in the market. I would expect we continue to see some challenges in the retail industry as well as the energy sector for the remainder of 2016. I expect the job creation topic to become front and center for the presidential nominee elections for both parties and it will be interesting to see the candidates plans to stimulate job growth, improve equality and increase wages.
The next BLS report will be published Friday, March 4, 2016 8:30 a.m.