Labor market strength continues in January

By Thomas Cooley and Peter Rupert

The labor market added  200,000 jobs in January as reported by the BLS. Over the month revisions showed an upward revision in December of 12,000 (148,000 to 160,000) and lower for November (252,000 to 216,000). The private sector added 196,000. The gains were widespread, with only small declines in a few sectors: Nondurable goods down 3,000 and Information jobs in the services sector were down 6,000.

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The strongest employment growth was in the service sector but there were also gains in construction and in the volatile mining sector driven by higher oil prices.

Although average hourly earnings rose from $26.65 to $26.74, average weekly pay fell from $919.43 to $917.18 due to weekly hours falling from 34.5 to 34.3. The work week may have contracted because of weather in January so it remains to be seen if there is increasing wage pressure  in the labor market.

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The household survey showed little changes, if any, in most of the categories. The unemployment rate nudged up from 4.09% to 4.15%. The employment to population ratio held at 60.1% and the labor force participation rate remained at 62.7%. Both of these have been stable for the past several months.

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Looking more closely at the labor force participation rate reveals some interesting trends for various groups. While the LFP rate for women had been climbing over time, it peaked in the early 2,000’s and has been declining since, although it has remained stable over the past couple of years. The long decline in male LFP has also slowed of late and is hovering around 69%. The only real increases over the past decade or so was in those 55 years and older. The decline of teens from 50% to about 35% is one of the more remarkable changes. Another large decline is seen for those with only a high school degree. Their labor force participation rate has fallen from about 65% to 57% over the past two decades. However, the LFP rate of those with less than a high school degree has remained roughly constant over the past couple of decades.

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The BLS released productivity numbers for January on February 1. Output per hour in the nonfarm business sector fell by 0.1% with output rising by 3.2% and hours rising 3.3%. This is one facto keeping wage growth low.

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