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News : US Economy Last Updated: Feb 7, 2014 - 3:20 PM


American economy only added 113,000 jobs in January; Falling trend
By Finfacts Team
Feb 7, 2014 - 3:00 PM

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The American economy only added 113,000 jobs in January, a disappointing result after a poor showing in December. The natural monthly growth of the workforce is at about 90,000. In recent months, data shows a falling trend.

The labour-force participation rate rose 0.2 percentage point to 63.0% - -  near the lowest level since 1978.

The Bureau of Labour Statistics (BLS) reported that nonfarm payroll employment increased by 113,000 in January, and the unemployment rate, at 6.6%, changed little. Private-sector employment grew by 142,000. Employment rose in construction, manufacturing, wholesale trade, and mining.

Incorporating the revisions for November and December, which increased nonfarm employment by 34,000 on net, monthly job gains have averaged 154,000 over the past 3 months. In 2013, employment growth averaged 194,000 per month.

Revisions by the BLS suggest that there were roughly 369,000 more jobs in the economy in March 2013 than previously estimated. That brought the estimate of total US employment that month to 135.7m jobs. The new data suggest the economy added 194,000 jobs a month in 2013.

The US added a meagre 113,000 jobs last month, raising concerns about the durability of the economy, but the unemployment rate dropped to 6.6% and a broader measure of unemployment dropped even further to 12.7% and it appeared to be for encouraging reasons.

The Wall Street Journal says that the main reason for the disparity is that the two figures are derived from different surveys. The number of jobs added comes from businesses in what is known as the establishment survey, while the unemployment rate is taken by a poll of households. The two data sets generally move in the same direction but can vary widely from month to month. January was one of those months.

The number of people who said that they had a job last month soared in January. The Labour Department made its annual change in the numbers it uses for the overall population this month. That makes January-to-December comparisons difficult, but those adjustments were pretty small overall this year. But even taking the adjustment into account, there were more than 600,000 more people this month counted as employed than last month.

At the same time the number of people in the overall labour force surged by nearly 500,000. That brought the share of the population working or looking for work — called labour force participation rate — up to 63%, still a low rate historically but moving in the right direction.

John Ryding, chief economist, and Conrad DeQuadros, senior economist, of RDQ Economics commented - - "We suggest looking at 12-month average trends in the household survey because of the monthly volatility in the report and we note that the number of unemployed has dropped by 2.1m since January 2013, while employment has risen by 1.8mn. This suggests the drop in the unemployment rate from 7.9% to 6.6% is not just a result of falling participation."

Construction added 48,000 jobs in January, more than offsetting a loss in December. In January, employment rose in both residential and nonresidential building (+13,000 and +8,000, respectively) and in nonresidential specialty trade contractors (+13,000). Heavy and civil engineering construction added 10,000 jobs.

Manufacturing employment increased by 21,000 in January. Job gains occurred in machinery (+7,000), wood products (+5,000), and motor vehicles and parts (+5,000). In 2013, employment growth in manufacturing averaged 7,000 per month.

In January, wholesale trade employment rose by 14,000, mostly in nondurable goods. Over the prior 12 months, wholesale trade added an average of 8,000 jobs per month.

Mining employment increased by 7,000 in January. In 2013, employment growth in mining averaged 2,000 per month.

Professional and technical services employment rose by 20,000 in January. Job growth averaged 17,000 per month in 2013.

Employment in leisure and hospitality continued to trend up in January (+24,000). Over the prior 12 months, leisure and hospitality added an average of 38,000 jobs per month.

In January, health care employment was essentially unchanged for the second consecutive month. In 2013, health care added an average of 17,000 jobs per month.

Retail trade employment changed little in January (-13,000). A large job loss in sporting goods, hobby, book, and music stores (-22,000) offset gains in the prior 3 months. Employment rose by 7,000 in motor vehicle and parts dealers over the month.

Federal government employment declined by 12,000 in January. Over the past 12 months, federal government employment has decreased by 85,000, or 3.0%.

Average hourly earnings of all employees on private nonfarm payrolls rose by 5 cents in January to $24.21. Over the past 12 months, average hourly earnings have risen by 1.9%. From December 2012 to December 2013, the Consumer Price Index for All Urban Consumers (CPI-U) increased by 1.5%.

The establishment survey data released today reflect the incorporation of annual benchmark revisions. Each year, The BLS re-anchors its sample-based survey estimates to full universe counts of employment, primarily derived from administrative records of the unemployment insurance tax system. The level of nonfarm payroll employment in March 2013 was revised up by 347,000 (not seasonally adjusted) or 0.3%. The average benchmark revision over the past 10 years was plus or minus 0.3%. (Further information about the benchmark revision and its impact is contained in the BLS news release and on the web site at www.bls.gov/web/empsit/cesbmart.htm.)

In accordance with usual practice, household survey data for January reflect updated population estimates from the U.S. Census Bureau. This year, the impact of the new controls on the unemployment rate and other major household survey measures is negligible.

Returning to the data for January, both the unemployment rate, at 6.6%, and the number of unemployed persons, at 10.2 million, changed little. The unemployment rate has declined by 0.6%age point since October. In January, the number of persons jobless for 27 weeks and over declined by 232,000 to 3.6 million, or 35.8% of total unemployment.

The labour force participation rate edged up to 63.0% in January. The employment-population ratio increased to 58.8%. Among the employed, the number of persons working part time for economic reasons fell by 514,000 to 7.3 million. These individuals would have preferred full-time employment, but had their hours cut or were unable to find full-time work.

In summary, nonfarm payroll employment increased by 113,000 in January, and the unemployment rate was little changed at 6.6%.

There's a big disappointment in the lack of revision to December, says CNBC's Steve Liesman breaking down the numbers on jobs. CNBC's Rick Santelli; Austan Goolsbee, Booth School of Business professor; Mark Zandi, Moody's Analytics, and Kevin Hassett, American Enterprise Institute, weigh in.

     

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