January Payrolls Up 157,000, Jobless Rate Rises to 7.9%

The Labor Department reported that the U.S. economy added 157,000 jobs in January and the jobless rate moved up from 7.8 percent to 7.9 percent, however, annual revisions to the data indicated sharply higher job growth in both 2011 and 2012 as payrolls were revised higher by about 600,000 for the period.

The number of unemployed people rose by over 100,000 in January, from 12.2 million to 12.3 million, while the number of employed people rose by just 17,000, leading to an increase in the jobless rate from 7.849 percent to 7.912 percent. Once again, this prompts the question of why the Labor Department characterized this as “the unemployment rate was essentially unchanged”. It wasn’t.

A broader measure of unemployment, the U6 rate that includes those people who have given up looking for work or settling for part-time work, was steady at 14.4 percent.

Returning to the establishment survey, the January gains were broad-based, however, at 157,000, they were below the consensus estimate of 170,000. Importantly, as it relates to Federal Reserve policy, while this level of job creation is enough to keep pace with the U.S. population growth, it does virtually nothing to reduce the unemployment rate.

Retail trade added 32,600 jobs last month, accounting for nearly all of the gains in the trade, transportation, and utilities category while more evidence of an improving U.S. housing market was seen in the 28,000 rise in construction payrolls. Note that all but 1,800 of these new jobs were in specialty trade rather than construction with the gains about equally divided between residential and nonresidential. 

The health care sector added 28,000 new positions and food service and drinking establishments were responsible for 17,100 of the 23,000 rise in payrolls in the leisure and hospitality group. Professional and business services payrolls rose by 25,000, however, temporary jobs fell by 8,000.

Lastly, government employment fell by 9,000 as state governments were hiring (+2,000) as the federal government cut back (-5,000) as did local governments (-6,000).