January’s Employment Situation Research Notes

by Jim Baird on February 3, 2012

Employment situation continues to improve with strong job creation in January

Job growth accelerated in December, as the economy added 243,000 jobs.  The unemployment rate declined to 8.3% in January, its fifth consecutive monthly decline.

Nonfarm payroll gains exceeded 100,000 for the seventh consecutive month after a two-month lull in the early summer.  At nearly a quarter million jobs gained, this was the best January for job creation since 2006.

Job gains were broad-based across both the service and manufacturing sectors.  There is also a glimmer of hope that the drag created by ongoing loss of government jobs is slowly moderating.

Recently, concerns have been raised that the severity of the plunge in the economy in the fall of 2008 may be skewing the seasonal factors that government agencies use to smooth reported economic data.  Moreover, the January report can be skewed by annual revisions to certain data points.  Both of these factors may be creating some noise in this report that could become apparent in the months ahead and the trend becomes clearer.

Overall, this is a positive report, suggesting that job creation continued to accelerate in the New Year.    Earnings are still growing slowly, but at the current pace aren’t likely to enable a meaningful pickup in consumer spending. 

Looking forward, we remain cautious about the headwinds that the economy will face in the quarters ahead and believe that a window of vulnerability still exists.  Today’s unexpectedly good jobs report is a welcome development though, and evidence that for now the U.S. economy continues to expand.

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