January 2015 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment increased by 257,000 jobs in January -- better than expectations of 230,000. Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked up by 0.1 percentage point, to 5.7% as more potential workers entered the labor force.

Although the overall tone of the report is positive, it is difficult to determine how much of the improvement is “organic” how much is statistical. The January report is notoriously noisy: Many of the flood of retail workers hired for the holidays are being let go; in addition, the numbers are subject to not only the “usual” monthly adjustments from the BLS’s business “birth/death” model, but also new seasonal adjustments that flow from re-benchmarking work the BLS undertakes annually to account for population changes. Taking into account all of the changes, employers now are estimated to have created 3.116 million jobs -- up 164,000 over the previous estimate of 2.592 million; 147,000 of the 164,000 were added to the data for November and December 2014.

As for other observations from the employment report:

• The disparity between the establishment survey (+257,000 jobs) and the household survey (+453,000 jobs) was relatively modest in January.
• Virtually all private super-sectors of the economy saw employment gains last month. Of particular interest, construction added 39,000 jobs and 22,000 in manufacturing. On a less-positive note, the number of bartenders and restaurant wait staff rose to 10.946 million (+35,000) -- continuing the trend toward convergence with the number of manufacturing jobs (12.330 million). 

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• For example, the employment-population ratio finally edged up by 0.001% after holding steady at 0.592 during the previous three months. The number of employment-age persons not in the labor force dropped back to 92.5 million (-354,000). Moreover, the 55-and-over age cohort achieved yet another all-time high of almost 33.0 million workers in January; that cohort outnumbers the next-largest (45-to-54 years) by 237,000. 

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• The labor force participation rate rose 0.2 percentage point (to 62.9%), but hovered near its multi-decade low of 62.7%. Average hourly earnings of all private employees jumped by $0.12 (the largest gain since June 2007), resulting in a 2.2% year-over-year increase (the largest 12-month gain since December 2012). For all production and nonsupervisory employees (pictured above), wages rose by $0.07/hour (+2.0% YOY). With the CPI running at an official annual rate of 0.8%, wages are technically keeping up with price inflation. 

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• Finally, full-time jobs increased (+777,000) along with part-time jobs (+40,000). Full-time jobs have been trending higher since December 2009, but have yet to recapture the pre-recession high. Part-time jobs, by contrast, have been stuck in a channel between roughly 27 and 28 million.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.