A robust job gain in January shows US economy's durability

A robust job gain in January shows US economy's durability

A robust job gain in January shows US economy's durability

Despite a partial government shutdown that lasted for much of the month, the USA economy added 304,000 jobs in January, according to the Labor Department.

Average hourly earnings rose three cents, or 0.1 percent in January after accelerating 0.4 percent in December.

The average hourly earnings also increased by 3.2 percent year-on-year. Meanwhile, the US added approximately 304,000 jobs, particularly in the leisure and hospitality, transportation and warehousing, construction, and health care industries.

The unemployment rate for veterans of all generations jumped from 3.2 to 3.7 percent.

The housing market has slumped as mortgage rates have increased.

The recent partial government shutdown was expected to push down jobs gains before the report came out. "With a continued low unemployment rate, historic trends in job gains, and rising wages, this employment report provides further evidence that the Administration's pro-growth, pro-worker policies are working".

Here's a brief rundown on how the shutdown did and did not affect the January unemployment report.

The household survey informs the unemployment rate (including the U6 rate), labor force data, labor force participation rate, and labor force demographic data presented in the jobs report.

Different job sectors contributed to USA job growth.

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In fact, the shutdown might have increased the number of jobs added as furloughed workers sought out part-time jobs.

In January, the number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.3 million and accounted for 19.3 percent of the unemployed. Those factors have led many economists to forecast slower growth this year compared with 2018.

But the rate of job growth in the industry is also bringing up labor costs as companies increase wages to lure workers that are increasingly hard to find.

Professional and business services grew by 30,000 new jobs, Transportation and warehousing added 27,000 and retail trade added an additional 21,000.

For the full year of 2018, the average monthly jobs gain was 223,000. We maintain that a relatively large potential supply of labor, including prime age people re-entering the workforce, will continue to drive these healthy job gains.

This metric is closely watched as a sign of the health of the labor market, since people who want to work full-time should be able to find jobs in such a "hot" market.

The bureau attributes the uptick in unemployment, which rose by 0.1 percentage point, to the partial government shutdown since furloughed federal employees were identified as temporarily laid off.

And for most of January, the weather was relatively warm in much of the United States, which likely boosted construction employment.

US economic growth is slowing from its rapid 2018 pace, but the continued robust gains in employment may cause pause to commentators that have been calling for recession. The views expressed in this column are the author's own and do not reflect those of Berenberg Capital Markets, LLC.

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