January Unemployment Report: The Lord and Noah
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The unemployment report for January 2013 was released this morning and provides better than expected news on the surface but with some reasons for concern as well. Let's navigate.
The Wall Street Journal review highlights the following:
Jobs growth for January fell short of expectations but continued at a moderate pace. However, The unemployment rate reversed course a bit, rising to 7.9 percent in January from 7.8 percent the month before. Analysts expected a 7.7 percent unemployment rate.
Payroll jobs in January continued to grow at a moderate pace, advancing 157,000, following a gain of 196,000 in December (originally up 155,000) and an increase of 247,000 in November (previously up 161,000). The net revisions for November and December were up 156,000. The market median projection was for a 175,000 rise for January.
The upward revisions are from annual revisions and indicate that job growth has been somewhat stronger than earlier believed. In 2012, employment growth averaged 181,000 per month. Most of the upward revisions were in the latter part of the year.
Private payrolls posted a gain of 166,000 in January after increasing 202,000 the month before. The consensus expected a 185,000 increase.
Earnings are continuing moderately healthy gains but at a slower pace in January. Average hourly earnings rose 0.2 percent in January, following a boost of 0.3 percent December. The market consensus was for a 0.1 percent gain. The average workweek held steady at 34.4 hours. Expectations were for 34.5 hours.
Turning to detail for the household survey, the rise in the unemployment rate, reflected a 143,000 boost in the labor orce while household employment edged up only 17,000.
The good news is that annual revisions to payroll employment suggest that the end of the year was not really as bad as the decline in GDP for the fourth quarter. The bad news is that job growth is still subpar.
Released On 2/1/2013 8:30:00 AM For Jan, 2013
Prior Prior Revised Consensus Consensus Range Actual Nonfarm Payrolls – M/M change 155,00 196,000 157,000 Unemployment Rate – Level 7.8 % 7.7 % 7.6 % to 7.9 % 7.9 % Average Hourly Earnings – M/M change 0.3 % 0.1 % 0.0 % to 0.3 % 0.2 % Av Workweek – All Employees 34.5 hrs 34.5 hrs 34.4 hrs to 34.5 hrs 34.4 hrs Private Payrolls – M/M change 168,000 202,000 185,000 138,000 to 210,000 166,000
The slight uptick in the unemployment rate should actually be viewed as a positive because it is indicative that more people feel at least somewhat confident to reenter the labor force. The upward revisions are also a positive sign but we need to look at the overall health of our economy and labor situation with a much wider angled lens.
A year ago in early 2012 our economy was adding approximately 300k jobs. That momentum faded and we averaged approximately 150k jobs added during the middle part of 2012. With the upward revisions reflected in today's report we averaged 181,000 jobs for all of 2012. That number is barely above the increase in the labor pool of approximately 145k per month based simply upon population growth.
Look for the Federal Reserve's QE-infinity to remain in vogue as it has put forth that it will maintain an accomodative stance until the unemployment rate hits 6.5% while inflation stays below 2.5%.
Add it all up and what does it mean? We are making slooooooooooooooow progress toward economic recovery with long term unemployed remaining a very real issue. It is tough to see this changing in dramatic fashion or in short order. In fact, the unemployment situation once again reminds me of what the Lord said to Noah.
What's that, LD?
“How long can you tread water?”
I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.