The Employment Situation for January – The Road to Nowhere

The Bureau of Labor Statistics (BLS) released the Employment Situation report for January. The report was disappointing overall but had a mix of good, bad and extenuating circumstances to keep the labor market outlook in limbo for a second month.

The establishment survey showed payroll employment expanded by 113,000 in January, following an upwardly revised 75,000 increase in December. The average monthly gain was 205,000 over the prior 12 months. These two months were the weakest since the spring slowdown in 2012, but were likely depressed by extreme weather.

According to the household survey, the unemployment rate dipped to 6.6% from 6.7% in December and 7.0% in November. The January decline was based on an increase of 616,000 in the number of employed persons that outpaced an increase in the labor force of 499,000. Both developments, an expanding labor force and an even greater expansion in employed persons are positives. In contrast, the November to December decline was based on defections from the labor force outpacing gains in employed persons. The bulk of the decline in the unemployment rate from its peak has come from labor force defections, so the January figures are a bright spot in the report.

Average hourly earnings ticked up and the length of the workweek held its ground, adding some additional modest ambiguity to an otherwise disappointing report.

With all eyes on the Fed, and all Fed eyes on the monthly labor reports, today’s report sheds little light on the Fed’s next move. Being neither strong enough nor weak enough to force the Fed’s hand on the pace of withdrawing its monetary stimulus, today’s report leaves it to next month to determine whether the labor market is moving forward, backward or nowhere, and whether the Fed will follow.

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