Hiring Picks Up As Employers Add 225,000 Jobs In January

Feb 7, 2020
Originally published on February 7, 2020 7:38 am

Updated at 11:23 a.m. ET

The U.S. labor market revved up in January, with employers adding 225,000 jobs. That's well above the number forecasters were expecting. The unemployment rate inched up to 3.6%, near a 50-year low, according to a new report from the Labor Department.

Employment growth for November and December was also revised upwards by a total of 7,000 jobs.

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Unusually warm weather contributed to a surge in construction last month, with 44,000 jobs added. Housing construction has also gotten a boost from low mortgage rates.

Hiring was also strong in service industries such as health care, education and hospitality, which have been steadily adding workers month after month.

Manufacturing continues to be a weak spot in the economy. Factories cut 12,000 jobs in January, despite signs of a recovery in manufacturing activity following a five-month slump.

"Manufacturing accounts for only 8.4% of payrolls, but it punches above its weight in the eyes of the markets, media and politicians," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "The trend clearly is deteriorating with the sector under pressure from the trade war."

White House economist Tomas Philipson said new trade deals with China, Canada and Mexico could give a lift to factory employment.

"We're very optimistic of a rebound in manufacturing taking place," Philipson said.

Retailers cut more than 8,000 jobs in a sign that brick-and-mortar stores continue to face pressure from the growth in online sales. By contrast, warehouses and transportation companies — which pack and deliver online purchases — added about 28,000 jobs.

Wage growth picked up a bit in January, though it remains modest given the very low level of unemployment. Over the past 12 months, average wages have risen 3.1%. That's more than enough to outpace inflation, boosting workers' buying power. But pay increases were higher earlier in the recovery.

"We wonder if the key response of businesses to the intensification of the trade war in the summer was to be more aggressive in pay negotiations," Shepherdson said. "If so, we doubt it can last as labor shortages become more acute."

The strong job market continues to draw new workers off the sidelines. Philipson estimates nearly three-quarters of new jobs in recent months have gone to people who were not previously looking for work. The share of adults in the labor force increased last month to 63.4%, the highest since 2013.

"I think there's still more room for the growth," Philipson said.

While the overall job market remains healthy, the Labor Department says past job gains were not as strong as initially reported. Once each year, the department updates its historical employment record using more complete information. Friday's revision shows employers added 514,000 fewer jobs between April 2018 and March 2019 than earlier surveys had indicated.

In the 36 months since President Trump took office, the U.S. has added 6.6 million jobs. By comparison, employers added 8.1 million jobs in the 36 months before that.

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America's jobs engine accelerated last month. The Labor Department says U.S. employers added 225,000 jobs in January. That is more than forecasters were expecting. The unemployment rate inched up a bit to 3.6%, but that is still close to a half-century low. NPR's Scott Horsley is with us now to pass the numbers. Hi, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Rachel.

MARTIN: So forecasters were expecting more modest gains in January, somewhere around 160,000. So this is somewhat of a pleasant surprise. What happened?

HORSLEY: One big bright spot was in the construction industry. We added 44,000 construction jobs in January. That's more than triple the monthly average we saw last year. Some of that is due to warmer-than-usual weather in January. So people who would have gotten hired later in the spring just got jobs earlier. So - but there's also signs of a real increase in homebuilding. That's thanks in part to lower interest rates. About half the construction jobs we added in January were on the residential side. And then we just saw a lot of hiring in things like health care, education and hospitality, which have been adding jobs month after month for a while now.

MARTIN: Any weak spots?

HORSLEY: Manufacturing continues to see some challenges. Factories were in a slump for about five months at the end of 2019, thanks in part to lower global demand for manufactured goods and trade tensions. Those trade tensions have eased a little bit. And we got a report earlier in the week suggesting a modest rebound in factory activity, but that didn't translate to factory jobs in January. Factories shed 12,000 jobs last month, and that's before we see any fallout from the coronavirus outbreak.

MARTIN: Right.

HORSLEY: Retail is also a weak spot as it has been. Eight thousand retail jobs were cut last month. You know, Macy's just announced another round of store closings this week. It's not that consumers aren't spending money; they are, but they're not necessarily spending it at the shopping mall.

MARTIN: Right.

HORSLEY: The plus side is that they are spending in online stores, and that means more jobs in warehouses and in transportation - picking up and packing up and delivering all those boxes. And we saw gains there of 28,000 jobs.

MARTIN: What about wages? Is the good job market affecting paychecks?

HORSLEY: We saw a little acceleration in wage gains in January. Over the last twelve months, wages - average wages are up 3.1%. That's up from 2.9% in December. And it is enough to keep consumers ahead of inflation. But it's still not as strong as you might expect, given the really low unemployment numbers we've seen. It could be there's more slack in the job market than the unemployment numbers would indicate. We continue to pull more people off the sidelines. The number of people in the labor force ticked up in January. That's good news because it means employers are finding the workers they need to keep the expansion going, but it does kind of keep a lid on wage hikes.

MARTIN: So the Labor Department also announced updated numbers, something - they updated some of their old numbers this month. Can you explain what those numbers are and why this is important to note?

HORSLEY: This is something the Labor Department does every year. They go back and update the employment figures using more complete information, and usually it doesn't make a big difference. This year, though, the revision is larger than normal. The department says about a half million fewer jobs were added between the spring of 2018 and the spring of 2019 than initially reported.

Now, it's still a real strong job market, but it does mean the jobs numbers that President Trump boasted about in his State of the Union speech this week need a little update. It turns out that in the first 36 months under President Trump, the U.S. economy added 6.6 million jobs. For comparison, in the previous 36 months, the U.S. economy added 8.1 million jobs.

MARTIN: All right. NPR's chief economics correspondent Scott Horsley for us this morning. Thank you, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.