The labor market remained in good health throughout the first month of 2020 with 225,000 new jobs added vs. expectations of just 164,000. Average hourly earnings rose, as did the rate of unemployment, although this remains near historic lows.
- January added 225,000 jobs vs. 164,000 expected, indicating ongoing strength in the labor market.
- Average hourly earnings rose 3.1% compared to the year before, although this is considered lackluster.
- The rate of unemployment rose from 3.5% to 3.6%, although labor force participation is at the highest level since June 2013.
The year has begun with more upbeat hiring news than expected following the slowdown seen throughout 2019. Hiring ticked downward due to recessionary pressure due to global economic conditions and the 19-month trade war with China which impacted multiple US industries, particularly manufacturing.
Supply chains are still suffering due to the grounding of the flawed Boeing 737 line of aircraft along with concerns over the spreading coronavirus, but the impact from the trade war has lessened following a preliminary trade agreement.
Wage growth continues to disappoint at just 3.1% annually. After climbing in 2018, growth has slowed overall throughout 2019, with the January growth failing to inspire confidence. The average workweek has gotten shorter and businesses have posted fewer job openings recently, perhaps indicating some weakness underlying the headline figures.
ZipRecruiter economist Julia Pollak stated “It really seems like we are seeing some slowdown in employer demand for workers and hours, and that means a bigger dent on people’s take-home pay.”
First Cut: January payroll growth remained strong after revisions, labor market conditions remain tight and able to tempt workers on the margins to participate. https://t.co/dJpe26rHQt pic.twitter.com/jzFZnZzqgg
— Whetstone Analysis LLC (@AnalysisLlc) February 7, 2020
Much of the January growth was due to unseasonably mild weather. Construction added 44,000 jobs vs. 12,000 on average in 2019. Leisure and hospitality, another industry beholden to weather conditions, added 36,000. Professional and business services rose by 21,000, transportation and warehousing added 28,000, and health care added 36,000. Meanwhile, the manufacturing industry lost 12,000 positions, largely due to reduced demand for motor vehicles and parts.
Households reported a total decline of 89,000 in employment, contributing to the rise in unemployment. 656,000 people left the full-time workforce while 537,000 entered part-time positions. Job gains have averaged at 211,00 over the last 3 months.
Gold prices have weakened slightly since the release of the report. Spot gold last traded at $1,569.20/oz, up 0.26% with a low of $1,563.15/oz and a high of $1,573.25/oz. Trading in a tight range, gold saw faced some selling pressure but have held fairly steady following the labor market news, which is unlikely to impact Federal Reserve monetary policy and thus unlikely to impact the price of gold. It’s possible that geopolitical concerns around the spread of the coronavirus are also contributing to risk-off sentiment in the market.