Thursday, January 31, 2019

January Employment Preview

by Calculated Risk on 1/31/2019 02:50:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for January. The consensus is for an increase of 158,000 non-farm payroll jobs in January (with a range of estimates between 140,000 to 183,000), and for the unemployment rate to be unchanged at 3.9%.

Last month, the BLS reported 312,000 jobs added in December.

Note on the government shutdown:  the Federal jobs will all be counted in the establishment report (headline jobs number), since the employees will be receiving back pay.   However, the furloughed employees will be counted as unemployed (on temporary layoff), so the unemployment rate will probably increase.

Note on Revisions: With the January release, the BLS will introduce revisions to nonfarm payroll employment to reflect the annual benchmark adjustment. The preliminary annual benchmark revision showed an upward adjustment of 43,000 jobs, and the preliminary estimate is usually pretty close.

Here is a summary of recent data:

• The ADP employment report showed an increase of 213,000 private sector payroll jobs in December. This was well above consensus expectations of 167,000 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 and ISM non-manufacturing employment indexes have not yet been released..

Initial weekly unemployment claims averaged 220,000 in January, up slightly from 219,000 in December. For the BLS reference week (includes the 12th of the month), initial claims were at 212,000, down from 217,000 during the reference week the previous month.

In general, the unemployment claims suggest a solid employment report.

• The final January University of Michigan consumer sentiment index decreased to 90.7 from the December reading of 98.3. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics. The decline in January is probably related to the government shutdown.

• Looking back at the three previous years:

In January 2017, the consensus was for 175,000 jobs, ADP reported 234,000 private sector jobs added, and the BLS reported 200,000 jobs added.

In January 2016, the consensus was for 175,000 jobs, ADP reported 246,000 private sector jobs added, and the BLS reported 227,000 jobs added.

In January 2015, the consensus was for 188,000 jobs, ADP reported 205,000 private sector jobs added, and the BLS reported 151,000 jobs added.

It appears the ADP report is usually too high for January.

• Conclusion:  In general these reports suggest a solid employment report, although I expect the unemployment rate to increase due to the government shutdown.  My guess is the report will be at or below the consensus, due to good weather in December (some payback in January), and possibly some private sector impact from the government shutdown.