Total nonfarm payroll employment increased by 467,000 in January, an improvement over the 199,000 jobs added in December, according to the latest jobs report from the U.S. Bureau of Labor Statistics (BLS). The unemployment rate increased 0.1 percentage points from December to 4% in January.
“January’s nonfarm payroll’s report reinforces how strong the U.S. economy is,” says Zonda chief economist Ali Wolf. “Hiring rose the most in leisure and hospitality, the economy’s most battered industry, and professional and business services, the economy’s highest wage. The unemployment rate ticked up slightly for good reasons (more people in the workforce), and the tight labor market is resulting in more pay, with average hourly earnings on the rise as well.”
Fannie Mae chief economist Doug Duncan says the annual revisions to both the payroll and household surveys included in the jobs report indicate the recent pace of labor market recovery “was stronger than previously thought.”
“In particular, job growth over the last three months of 2021 was revised upward to a total of 1.8 million, compared to a previously reported 1.1 million, with offsetting downward revisions earlier in the year, a significantly stronger pace than previously estimated,” says Duncan.
The number of unemployed individuals, 6.5 million, increased approximately 200,000 compared with December. Over the year, the unemployment rate decreased by 2.4 percentage points, and the number of unemployed individuals decreased by 3.7 million.
Among the unemployed, the number of job leavers increased 952,000 in January, following a decrease in December. The number of persons on temporary layoff, at 959,000 in January, is down by 1.8 million over the year, according to the report. The number of long-term unemployed declined to 1.7 million, down from 4 million a year earlier, but is 570,000 higher than in February 2020. The long-term unemployed accounted for 25.9% of the total unemployed in January.
After accounting for the annual adjustments to the population controls, the labor force participation rate held at 62.2% in January, and the employment-population ratio was little changed at 59.7%. Both measures are up over the year but remain below their February 2020 levels.
“With revisions, today’s report does show the labor force participation, which has been slow to recover, is higher than we had previously thought, another positive sign for the labor market recovery,” Duncan says. “The levels of both household employment and the labor force are now about 1.5 million higher than previously estimated. Additionally, average hourly earnings grew at a 5.7% year-over-year pace, the fastest annual pace since May 2020, a clear sign that firms are looking to hire.”
According to the Household Survey Supplemental Data, the share of employed persons who teleworked because of the pandemic increased to 15.4% in January from 11.1% in December. During January, 6 million individuals reported they had been unable to work because their employer closed or lost business due to the pandemic, a significant increase than the 3.1 million individuals in December. Among those not in the labor force in January, 1.8 million persons were prevented from looking for work due to the pandemic, up from 1.1 million in the prior month.
The residential construction sector, including specialty trade contractors, saw job growth of 4,400 in January, higher than December’s pace. Duncan says Fannie Mae believes the pace of employment growth in the industry “will help alleviate supply constraints present in this sector.”
Duncan says the robust job growth seen in the January report “paves the way” for the Federal Reserve to begin raising rates at their policy meeting next month.”
“Investors see this latest jobs report as another piece of proof that the Federal Reserve needs to get moving on raising short-term interest rates, still expected in March,” says Wolf.
