US Jobs Report: Behind the Numbers
Nonfarm payrolls rose by 227,000 in the first employment report of the new year, significantly stronger than the median consensus of 180,000, according to Bloomberg, and the fastest pace of job creation in four months. The three-month average rose from 148,000 to 183,000 in January while the trailing twelve-month average was little changed at 195,000.
The fastest pace of job creation in four months should be enough to buoy market optimism and put the Fed on notice. But from a monetary policy standpoint, Fed officials are increasingly focused on wage growth as opposed to the headline payroll number as an indication of the health of the US labor market. It’s not about the number of jobs created but the quality of jobs created translating into a rise in wages to jumpstart consumption and investment flows in the broader economy.
A significant deterioration in the upward trend in wages that had been at the forefront of many policy makers’ argument for a continued removal of accommodation has now lost its luster. In other words, it’s a good thing the Federal Reserve made no mention of the March meeting in this week’s FOMC statement. After all, it’s going to be difficult for the Fed to justify any change to policy amid a sea of uncertainty from a fiscal standpoint, coupled with waning momentum in one of the key indicators used to argue in favor of a near-term rate hike.
Note, this is not officially the first employment report released during the Trump presidency, but the survey for the January employment report is from December 18 through January 15. Thus, the survey for the January release ended prior to Trump’s first day in office on January 20.
Lindsey Piegza, Ph.D., is chief economist at Stifel Fixed Income.