Data_Note: January Jobs

Job and wage growth remain solid, supporting ongoing expansion...for now.

Payrolls were up by 143,000 last month and the unemployment rate was a low 4% in another solid jobs report. Though the headline payroll number came in below expectations, the more informative (of the underlying trend) three-month average stands at a strong 237,000 (Nov and Dec job gains were revised up by a cumulative 100,000).

Let’s dive a bit into real wage growth, because a) it’s been impressive, and b) some partisan chin-music-makers have been getting this wrong. The figure below shows nominal yrly wage growth for the 80% of workers that are blue-collar or non-managers. Think of it as representing middle- and low-wage trends. The lighter line shows yrly inflation. Ignore the highly data-distorted pandemic period.

The yellow parts I drew in (you realize I no longer have a staff, right??) show middle-wage growth handily beating price growth—i.e., real-wage gains—pre- and post-pandemic. In fact, the post-pandemic real wage story is outlasting the pre-pandemic period.

To be clear, I’m not making a partisan point. I’m making a full-employment point, as that critically important condition persisted in both of these periods. It’s one of the most reliable forces we have to ensure that the bakers get a fairer slice of the pie they’re helping to bake.

A few other observations:

• Due to revisions in the Household Survey (discussed next), we can’t compare Dec24-Jan25 changes, but labor force participation continues to look good, especially for prime-age (25-54) workers: 83.5%, up from its pre-pan peak of 83.1%.

• Sectors that added jobs include retail trade, health care, gov’t. Goods sectors (mostly manufacturing and construction) were flat.

• Layoffs remain low. This is a very important sign, as we know hiring has slowed, quit rates are down, i.e., there’s less dynamic labor market churn than there was a few years ago. But that’s okay—we’re into a solid, sustainable, steady job market…for now.

Today’s report reflects significant and even historic revisions, most notably to the size of the population in the Household Survey (from which we get unemployment, labor force participation), which was adjusted up by almost 3 million to reflect increased immigration over the past few years. However, since such revisions feed into both numerators and denominators of labor force statistics, the tend not to have large impacts on the ratios we know and love—e.g., they increase both employment and population, so the emp/pop ratio tends to be little changed.

The payroll survey was also revised to reflect a more accurate job count from a separate survey (the administrative employment data from the UI system). This was a negative revision of about 590,000 which the BLS wedges in over data from last year. One impact of this revision is to lower the Biden jobs record from 16.6 million jobs to 16 million, which still represents historically strong job gains.

So, given the ongoing and truly scary political chaos, what does it all mean?

That’s a trick question. One month’s jobs data should never change your broad view of what’s going on the the economy or the job market. Think of it as a point in one of those pointillism paintings. The broader picture today is the same as it was a month ago: A persistently strong job market and easing inflation continue to support real wage and income gains, which in turn are supporting aggregate consumer spending and robust investment. This dynamic has, thus far, been a recipe for a first-in-its-global-class economic expansion.

What about the jobs and earnings impact of the new administration’s zone flooding? Clearly too soon to see anything in January data. Over time, I’ll be watching for the outcome of at least three competing tensions. First, visions of tax cuts and deregulation are boosting business’ animal spirits, a positive for hiring. Second, pushing the other way, is a-lot-larger-than-usual uncertainty about where impactful policies, like tariffs, are heading. There’s solid evidence that this is a negative for business investment.

Third, also a negative, one I’d be careful not to discount, is how all this government upheaval—firings, incenting layoffs, cutting Congressional-mandated payments (which is surely illegal), unauthorized access to sensitive data—plays out in the real economy. True, many US AID resources (eg) flow abroad, but the tendrils between government outlays and domestic businesses run deep.

Note: Given the outrageous extent of the new administration’s intervention in government agencies, including by unelecteds, one would be foolish not to worry about them musking around with government data of the type reported above. I’m confident that if they tried to do so, workers in our statistical agencies, a workforce with, in my personal experience, deep integrity, would publicly shout about such efforts. But this is an area where we all need to be highly vigilant.