All Posts Tagged: U.S. Outlook
The headline nonfarm payroll gain of 225k jobs last month handily beat analysts’ forecasts looking for a gain of 165k jobs in January. U.S. nonfarm payroll growth was 1.8% on an annualized basis last month.
The 3-month average monthly job gain improved to 211k in January up from 154k last July when the Fed started cutting interest rates. But rather than celebrating, the U.S. January jobs data already feels a bit stale. The growing risks to Chinese and global growth from the emerging Coronavirus will likely tarnish some of the shine coming from the U.S. labor market in the months ahead.
The January job gains were clearly bolstered by milder than normal winter weather last month, making the seasonally adjusted jobs data appear more favorable. The benefits of the Fed rate cuts from last year were also visible in the construction, transportation, and leisure and hospitality job gains. Construction payrolls jumped by 44k jobs last month as housing construction reaccelerated on falling mortgage rates. Census hiring also shone through as government payrolls increased by 19k jobs last month with Federal government payrolls rising 12k jobs alone. Education and health care added a robust 72k jobs.
On the downside, U.S. manufacturing payrolls fell by 12k jobs in January and have contracted in three of the past four months. The Boeing 737 Max production shutdown probably added to the manufacturing payroll declines last month. Modest net job loss was also seen in retail trade (-8k), temporary help services (-2k), and financial services (-1k) last month.
Moreover, the U.S. unemployment rate ticked higher to 3.6% in January from 3.5% in December. The increase in the unemployment rate last month was driven by an 89k job decline in household employment. The unemployment rate is calculated from a more volatile household survey on employment than the establishment survey. Also, earnings growth remains lackluster.
Average hourly earnings increased 0.2% last month up 3.1% from a year ago. But in inflation adjusted terms, real average hourly earnings were up only 0.6% year-on-year in December. Hours worked increased 0.2% last month with a strong 0.9% gain in construction hours, but a 0.1% decline in manufacturing hours.
Taking a longer-term view, we see a rising disconnect between overall job growth and job gains in the manufacturing sector. We think this weakens the foundation of sustained nonfarm payroll growth at the pace we have seen in recent months.
Chinese and global growth forecasts continue to be cut, which could intensify the already steep headwinds for U.S. manufacturers coming from the Boeing production shutdown. U.S. automobile manufacturers, information technology, trade and tourism, and leisure and hospitality sectors are most at risk right now. They face supply chain disruptions, rising production costs, and weakening sales and demand globally.
Bottom-line, U.S job growth is still performing above expectations through January, but it’s going to be far harder to repeat the performance over the balance of the year.
Taking a longer-term perspective, the growing disconnect between manufacturing and services job creation, the deterioration in real earnings growth, and downside risks to demand from the Coronavirus, should keep investors on the defensive side. Today’s jobs data was not weak enough to get the Fed to move off the sidelines, however. They will remain in wait-and-see mode at the March FOMC meeting, but will begin pointing to growing downside risks to U.S. growth and inflation.
To learn more, check out this week’s U.S. Outlook.Read More ›
Consumer confidence has rebounded strongly since August.
Record stock market prices and continued job growth have helped revive consumers’ spirts in recent months. The University of Michigan’s consumer sentiment measure jumped to 99.8 in its final reading for January – a full 10 point gain off the August lows and not far from the expansion highs of 101.4 hit way back in March of 2018.
2019 was shaped by the Fed pivot. The Fed had anticipated three quarter point interest rate hikes in 2019, only to quickly change course early last year and ultimately cut the Fed funds rate three times between July and October to forestall a deteriorating global and U.S. growth outlook.Read More ›
The takeaway from all the latest reports is that the U.S. economic outlook remains mixed with the balance of indicators continuing to point toward further slowing in the months ahead. But on the bright side, the U.S slowdown glide path we are on is gradual.Read More ›
U.S. nonfarm payrolls increased by only 145k jobs in December, a slight undershoot from the consensus forecast of 160k and our own forecast of 170k. This is a sharp deterioration from November’s 256k job gain.Read More ›