Pennsylvania Trust

Notes on the Non-Farm Payrolls

Notes on the Non-Farm Payrolls

Despite the partial government shutdown, employers started 2019 by hiring the most workers in almost a year.  The net new 304k jobs in January nearly doubled consensus (165k), but December’s gains were revised down sizably to 222k from 312k, as the Bureau of Labor Statistics (BLS) incorporated its annual benchmark revisions.

  • The Devil in the Details: The Bureau of Labor Statistics (“BLS”) announced that the initial response rate for the Establishment Survey was just 61%, the lowest since 2008, which suggests that significant revisions to the January data is likely. The December report also had a low initial response rate and its data was revised sizably today.

The unemployment rate increased to 4.0% from 3.9% in January, as Federal employees furloughed by the shutdown are usually recorded as unemployed in the survey. The BLS stated that the number who reported being on temporary layoff increased by 175,000 (likely an effect of the shutdown).  This suggests that the measured number of unemployed will fall in February, lowering the unemployment rate below 4%.

  • The Devil in the Details: Typically, when the unemployment rate has increased by a third of 1% we have entered a recession in the next 12 months.  The low on unemployment was 3.7%.

The labor force participation rate continued to defy expectations, rising for the second consecutive month to 63.2% from 63.1%.

  • The Devil in the Details: The underemployment rate, a broader measure of labor market slack, jumped to 8.1% from 7.6%.

Average hourly earnings rose by a slight 0.1% m/m, lowering its yr/yr change by 0.1pp to 3.2%

  • The Devil in the Details: This implies that real inflation-adjusted earnings growth likely remained over 1%, a positive for consumption.

G-7 = Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States

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