Another excellent job report

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January jobs report: huge gain in wages, huge upward revisions to past few months, limited Omicron impact

Here are the three issues I was looking to see addressed in this jobs report: 1. Would last month’s “poor” 199,000 number of new jobs be revised higher? 2. Is wage growth holding up? Is it accelerating?3. In December, big decreases in the number of initial jobless claims were not reflected in a better jobs number. Would the big increase in initial jobless claims in the past month due to Omicron similarly not be reflected? Or would they show up as an actual decline in hiring, as indicated in ADP’s -301,000 decline reported earlier this week?

The answers were:

1. The 6 month average of monthly gains which declined significantly in December from about 600,000 to 500,000, increased to 547,000, . We still have 2.9 million jobs to go to equal the number of employees in February 2020 just before the pandemic hit. At the current average rate for the past 6 months, that’s about 5 more months.

2. Wage growth exploded even higher than before, now up 6.9% YoY! Aside from April 2020, this is the highest wage growth in *40 years.*

3. There were *huge* upward revisions (included as part of the annual revisions) to the last 2 months. November increased 398,000 to 647,000, and December increased 311,000 to 510,000. So much for those poor numbers!

Here’s my in-depth synopsis of the report:

HEADLINES:

• 467,000 jobs added. Private sector jobs increased 444,000. Government jobs increased by 23,000 jobs. The alternate, and more volatile measure in the household report indicated a gain of 1,199,000 jobs(!), which factors into the unemployment and underemployment rates below.
• The total number of employed is still 2,875,000, or -1.9% below its pre-pandemic peak. 
• U3 unemployment rate rose 0.1% to 4.0%, compared with the January 2020 low of 3.5%.
• U6 underemployment rate fell -0.2% to 7.1%, compared with the January 2020 low of 6.9%.
• Those not in the labor force at all, but who want a job now, declined -9,000 to 5.704 million, compared with 5.010 million in February 2020.
• Those on temporary layoff increased 147,000 to 959,000.
• Permanent job losers declined -73,000 to 1,630,000.
• November was revised upward by 398,000, and December was also revised upward by 311,000, for a net gain of 709,000 jobs compared with previous reports.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and will help us gauge how strong the rebound from the pandemic will be.  These were mixed:

• the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.1 hour to 40.2 hours.

• Manufacturing jobs increased 13,000. Since the beginning of the pandemic, manufacturing has still lost -240,000 jobs, or -1.9% of the total.
• Construction jobs decreased -5,000. Since the beginning of the pandemic, -125,000 construction jobs have been lost, or -1.6% of the total.
• Residential construction jobs, which are even more leading, rose by 3,600. Since the beginning of the pandemic, 43,500 jobs have been *gained* in this sector, or +5.2%.

• temporary jobs rose by 26,300. Since the beginning of the pandemic, 156,400 jobs have been gained.
• the number of people unemployed for 5 weeks or less increased by 440,000 to 2,888,000, which is 949,000 higher than just before the pandemic hit.
• Professional and business employment increased by 86,000, which is 511,000 *above* its pre-pandemic peak.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.17to $27.91, which is a 6.9% YoY gain. This continues to be excellent news, especially considering that a huge number of low-wage workers have finally been recalled to work.

Aggregate hours and wages:

• the index of aggregate hours worked for non-managerial workers fell by -0.3%, which is a  loss of -1.9% since just before the pandemic.
•  the index of aggregate payrolls for non-managerial workers rose by 0.3%, which is a gain of 9.9% (before inflation) since just before the pandemic.

Other significant data:

• Leisure and hospitality jobs, which were the most hard-hit during the pandemic, gained 151,000 jobs, but are still 1,750,000, or -10.3% below their pre-pandemic peak.
• Within the leisure and hospitality sector, food and drink establishments increased 108,000 jobs, and is still -984,700, or -8.0% below their pre-pandemic peak.
• Full time jobs increased 973,000 in the household report.
• Part time jobs increased 136,000 in the household report.
• The number of job holders who were part time for economic reasons decreased by -212,000 to 3,717,000, which is a decrease of -673,000 since before the pandemic began.
• Health care employment rose by 18,000, a YoY gain of  174,900, or 1.1%, despite being the most critical sector during the pandemic.
• State and local education jobs, another hard hit sector by the pandemic, increased 28,500.

SUMMARY
With the exception of some short term negative numbers caused by Omicron layoffs, and a further decline in average manufacturing hours, which is getting to the level of concern, this was an excellent report, buoyed in part by annual benchmark revisions. 

Monthly gains continue at a clip in excess of 500,000. At the current rate, we will have regained all jobs lost due to the pandemic by the 4th of July. The slight increase in the unemployment rate was because so many people entered the labor force. There was also some welcome news on education jobs. Only the leisure and hospitality sector remains really hard hit by the pandemic.

Perhaps the biggest news of all was the even bigger increase in average hourly wages by non-supervisory workers. A month ago I described the JOLTS report as being analogous to a reverse game of musical chairs, with jobs being the chairs and potential employees those wanting to sit in them. With a chronic shortage of people being willing to sit in the chairs on offer due to the pandemic, jobs are going unfilled, while virtually nobody is getting laid off. As a result, wages haven’t just increased, but they *continue* to increase and that rate of increase is even accelerating. Workers haven’t had it this good in decades.
So, a few clouds on the horizon (manufacturing), but another excellent job report.