January 2024 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed nonfarm employers adding 353,000 jobs in January -- more than double the +170,000 expected and above even the highest analyst prediction (+300,000). Also, November and December 2023 employment changes were revised up by a combined 126,000 (November: +9,000; December: +117,000 -- from the original +216,000 to the revised +333,000)..

Meanwhile, the unemployment rate (based upon the BLS’s household survey) was unchanged at 3.7%, as a drop in the number of unemployed (-144,000) was essentially matched by a contraction of the labor force (-175,000). 

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Observations from the employment reports include:

* The establishment survey data were revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors; we observed changes as far back as January 1990. Also, household survey data for January 2024 reflect updated population estimates, which adversely affect the comparability of household data series over time; consequently, comparisons to December 2023 or earlier time periods should be taken with a proverbial “grain of salt.” That said, the two surveys once again diverged widely, which erodes their credibility. While the establishment report showed the addition of 353,000 jobs, the household report indicated the number of employed fell by 31,00.

* Goods-producing industries gained 28,000 jobs; service providers: +325,000. Job gains occurred in professional and business services (+74,000), health care (+70,300), retail trade (+45,200), and social assistance (+30,100). Employment declined in the mining, quarrying, and oil and gas extraction industry (-5,000). Total nonfarm employment (157.7 million) is now nearly 5.4 million jobs above its pre-pandemic level in February 2020 (private sector: +5.17 million; public sector: +224,000). Nonetheless, employment is perhaps 4.7 million below its potential if accounting for growth in the working-age population since January 2006.

Manufacturing added 23,000 jobs (led by nondurable goods: +19,000 -- especially chemical manufacturing: +6,900). That result seems to be at odds with the change in the Institute for Supply Management (ISM) manufacturing employment subindex, which contracted more quickly (to 47.1) in January. Wood products manufacturing shed 900 jobs (ISM was unchanged); paper manufacturing: -1,800 (ISM decreased); construction: +11,000 (ISM not yet published).

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* The number of employment-age persons not in the labor force fell (-275,000) to 100.3 million (5.0 million above February 2020). Because the working-age civilian population contracted (-175,000) while the number of employed edged lower (-31,000), the employment-population ratio (EPR) inched up to 60.2%, which is 0.9PP below its February 2020 level. 

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* Also, because the working-age civilian population fell by 451,000 while the labor force shrank by 175,000, the labor force participation rate was unchanged at 62.5%. Average hourly earnings of all private employees nudged up by $0.19 (to $34.55), and the year-over-year increase decelerated to +3.9%. Because the average workweek for all employees on private nonfarm payrolls decreased to 34.1 hours, average weekly earnings fell (-$0.39) to $1,178.16 (+1.2% YoY). With the consumer price index running at an annual rate of +3.4% in December, the average worker likely lost purchasing power. 

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* Full-time workers ticked lower (-63,000) to 133.1 million; there are now over 2.3 million more full-time jobs than in February 2020. For perspective, however, the non-institutional working-age civilian population has expanded by 7.9 million during that period. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- rose by 211,000, while those working part time for non-economic reasons fell (-302,000). Multiple-job holders: -293,000.

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For a “sanity test” of the job numbers, we consult employment withholding/FICA taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in January ticked up by $2.4 billion, to $290.1 billion (+0.8% MoM; +1.7% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year; the average of the three months ending January was down 4.7% from the year-earlier average.

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.