A Strong January Employment Report

This morning’s Employment Situation report from the Bureau of Labor Statistics showed decent strength in labor markets.  In January, there were 225,000 new jobs added, significantly higher than the 161,000 jobs predicted. The headline unemployment number (U3), which was expected to remain unchanged, ticked up one-tenth to 3.6%. Job gains were strongest in construction, health care, and transportation and warehousing. Some of the strength in construction could be attributed to an unusually warm month that didn’t suppress construction activity. Hourly earnings rose 3.1% year-over-year.

This month’s release incorporates the annual benchmark revisions, as well as some technical adjustments to the construction of some of the series. The big news here is that the revisions lowered the level of employment by about 500,000 jobs.  That is, after reconciling the reported data with other available data (mostly tax data), the level of reported employment was adjusted down, net by about 500,000 jobs, but with month-to-month variability over the last 12 months.

Also, as a result of these revisions, the broadest measure of labor underutilization (U6) has been revised down notably. The January number is 6.9%, up two-tenths from the revised 6.7% in December.  This number stood at a revised 8.0% in January of 2019.

While the downward revision in the level of employment is a little large by historic standards, that doesn’t take much away from the decent strength shown in the monthly change.