Heisenberg Report

Jobs Report Blows Through Expectations As Labor Market Heats Up Anew

The US economy added 225k jobs in January, well ahead of expectations, underscoring the notion that the expansion (at least as manifested in the labor market) is intact – for now anyway.

The market was looking for 165k on the headline. The range was 70k to 220k, which means this is a beat that topped even the most optimistic forecasts.

The unemployment rate ticked higher to 3.6%.

Revisions added 7k to the prior two months. November’s headline moves up 5k to 261k and December was revised up 2k to 147k. The annual benchmark process contributed to the
November and December revisions. After revisions, gains have averaged 211,000 over the
last three months.

On the down side for the White House, annual revisions trimmed 2018’s jobs gain to 2.31 million, down from 2.68 million. Gains in Trump’s other two years in office (i.e., 2017 and 2019) were around 2.1 million. As Bloomberg notes, that means “each year under Trump has been slightly slower than the 2.35 million rise in the final year of the Obama administration”.

Private payrolls rose 206k in January. That’s a big beat. Consensus was looking for 155k. The gain on government payrolls (19k) was the largest since August.

Manufacturing payrolls fell 12k, more than expected. That brings the two-month loss to 17k.

Average hourly earnings, meanwhile, rose 3.1% YoY. That was more than expected, but only by a tenth. As a reminder, December brought the first sub-3% print since July of 2018. The MoM rise for January was a cooler-than-expected 0.2%.

This was a good week for the US economy. Friday’s jobs numbers reinforce the message from Wednesday’s blockbuster ADP report, which boasted the best headline number since May of 2015. Earlier in the week, ISM manufacturing jumped back into expansion territory after spending five months mired in contraction. ISM services bested expectations too.

Estimates and priors