Thursday, February 01, 2018

January Employment Preview

by Bill McBride on 2/01/2018 12:01:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for January. The consensus, according to Bloomberg, is for an increase of 175,000 non-farm payroll jobs in January (with a range of estimates between 150,000 to 205,000), and for the unemployment rate to be unchanged at 4.1%.

The BLS reported 148,000 jobs added in December.

Here is a summary of recent data:

• The ADP employment report showed an increase of 234,000 private sector payroll jobs in January. This was well above consensus expectations of 176,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth above expectations.

• The ISM manufacturing employment index decreased in January to 54.2%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased about 3,000 in January. The ADP report indicated manufacturing jobs increased 12,000 in January.

The ISM non-manufacturing employment index will be released next Monday.

Initial weekly unemployment claims averaged 234,500 in January, down from 241,750 in December. For the BLS reference week (includes the 12th of the month), initial claims were at 216,000, down from 245,000 during the reference week in December.

The significant decrease during the reference week suggests a stronger employment report in January than in December.

• The final January University of Michigan consumer sentiment index decreased to 94.4 from the December reading of 95.9. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion:  In general, these reports suggest a solid employment report.  There was some weather issues early in the month, but mostly before the reference week.  My guess - probably influenced by the low number of unemployment claims during the reference week - is that the employment report will be above the consensus in January.

Note from the BLS: "Effective with the release of The Employment Situation for January 2018 on February 2, 2018, the establishment survey will introduce revisions to nonfarm payroll employment, hours, and earnings data to reflect the annual benchmark adjustment for March 2017 and updated seasonal adjustment factors. Not seasonally adjusted data beginning with April 2016 and seasonally adjusted data beginning with January 2013 are subject to revision. Consistent with standard practice, some historical data may be subject to revisions resulting from issues identified during the benchmark process."   The preliminary benchmark revision showed an increase of 95,000 jobs.