T he headlines describing the January 2014 BLS Employment Situation release focus on the low new job creation number of 113,000. Coming on the heels of the distressingly low figure of only 75,000 new jobs in December, this latest jobs report reinforced concerns about the health of the US economy.

Conversely, despite the slow pace of new job creation, the unemployment rate fell a tenth of a percent to 6.6%. Over the past 12 months the unemployment rate has fallen 1.3%. Low job creation and declining unemployment presents a decidedly mixed picture of the labor market.

Caution is Needed in Comparing January to 2013 Numbers
Adding to the complexity of interpreting the January report, the Bureau of Labor Statistics performed its annual statistical maintenance this month. Relying on Unemployment Insurance tax records, the baseline of existing jobs used in the Establishment Survey (businesses) was revised upward. Furthermore, the scope of the survey was expanded to include health homecare workers, adding 347,000 workers to the employment level reported. Simultaneously, the BLS revised its population figures based on updated US Census estimates. This change accounts for the 0.2% increase in the January participation rate. In this context, where changes of a tenth of a percent get undue emphasis, care must be taken to allow for the effect of revisions to the foundational employment and population estimates.

Things Are Not As Bad as They Seem
The Establishment Survey reports feeble job creation, but even that story offers some bright spots. Private sector employment increased 142,000, but was reduced by 29,000 jobs lost in the public sector (including -9,000 by the Post Office). November job creation estimates were increased 33,000, though December was only revised upward a paltry +1,000.

The Household Survey, the basis for the unemployment rate estimate, paints a more encouraging picture of the labor market. Underscoring the different bases of the two surveys used to prepare the Employment Situation release, the Household survey reports 523,000 more people working in January than in December. There are other positive features in the Household portion of the release. The number of people reported as working part time for economic reasons (i.e., they wanted but couldn’t get more hours) declined by 479,000. Workers unemployed for more than 27 weeks declined by 232,000. The broadest measure of unemployment, the U-6, declined 0.4% to 12.7%. While businesses report only a modest number of new jobs created, households are describing a more robust labor market of increasing employment opportunities.

Job Category Highlights

  • Added Jobs: Construction, Professional & Business Services, Manufacturing, Hospitality, Mining
  • Unchanged: Healthcare – other categories were also flat, but the health field typically increases
  • Declining jobs: Retail, Government

Temporary Employment Analysis
Agency temp employment was up again in January, but only slightly. This likely reflects the end of seasonal demand for supplemental retail and distribution labor. Temp employment is up a robust 228,700 over the prior 12 months.

bls-temp

Downward Revisions Not an Encouraging Sign
Temporary labor staffing firms have been a reliable engine of job creation for more than three years. The substantial downward revisions to temp employment estimates for November and December are potentially a source of concern if the trend continues further in 2014. Temp labor employment has risen every month since August 2012, increasing an average of 17,700 each month, so the 8,100 increase in January represents a slowing in the pace of job creation.

bls-temp-revisions

News Coverage
As in December, the focus of news coverage has been on the significance of the low new job creation and on the potential impact on Federal Reserve decision making.
NYT
Reuters
WSJ

Share on FacebookTweet about this on TwitterShare on VKShare on LinkedInShare on Google+Email this to someone