NEW YORK — Payroll employment growth in the United States slowed in January, but to a still solid, and stronger-than-expected 257,000 following sizeable upward revisions to growth in the prior two months, RBC Economics reported.
Employment growth in December 2014 was revised upward to 329,000 from 252,000 previously, with November growth revised upward to 423,000, thereby marking the first better than 400,000 gain since a May 2010 reading that was boosted by temporary census hiring, from 353,000.
The January increase was more than accounted for by a 267,000 increase in private employment that offset a 10,000 drop in government jobs. Gains were broadly based by industry in January and led by a 46,000 gain in retail hiring defying concerns about a payback in the sector in January after strong hiring during the holiday shopping period.
The average private-sector workweek was unchanged at 34.6 hours, but with employment rising, total hours worked still increased by 0.2 percent after a 0.3 percent gain in December. Average hourly earnings rose by 0.5 percent to retrace a surprising 0.2 percent dip in December. The January increase pushed year-over-year growth in the measure upward to 2.2 percent from 1.9 percent in December.
Despite strong payroll employment gains, the unemployment rate, which is calculated from the separate household survey, inched upward to 5.7 percent from 5.6 percent in December, thereby reflecting a surge of new entrants into the labor force. That result left the measure still below its 5.8 percent level in November while the participation rate rose to 62.9 percent from 62.7 percent previously.
Today’s release also incorporated annual benchmark revisions into the payroll employment data. The level of employment in March 2014 (the month when benchmark employment counts are collected) was revised upward by a larger than expected 91,000, which was above early estimates from the Bureau of Labor Statistics (BLS) for a 7,000 upward revision in that month.
The level of employment in December 2014 was revised upward by a larger 245,000, although revisions to that month include both benchmark revisions and normal monthly revisions to data in recent months. Average monthly employment growth for 2014 is now estimated at 260,000 per month (above the previously estimated 246,000) with average private-employment growth revised upward to 254,000 from 238,000 previously.
“The gain in employment in January was larger than expected and followed sizeable upward revisions to growth in earlier months,” said Nathan Janzen, an RBC economist. “Wage growth rebounded after a surprising decline in December, while the unemployment rate ticked upward but is still below its November level and almost a percentage point below the 6.6 percent reading a year ago.
“Although the pace of gains in employment during the last three months should be difficult to be maintained on a sustained basis, given shrinking slack in the labor market, our forecast assumes that economic growth will continue to put downward pressure on the unemployment rate going forward,” he added. “Along with some strengthening in inflation trends (excluding energy), we expect this is ultimately to trump any concerns about the external growth outlook and prompt the first increase in the Fed funds target rate by mid-year 2015.”
Canadian employment jumps higher in January
Employment in January 2015 rose by a stronger than expected 35,400 that more than reversed declines in December and November 2014 of 11,300 and 16,300, respectively. Market expectations had been for a modest increase of only 5,000, said Paul Ferley, assistant chief economist.
The January job gain outpaced the 20,700 rise in the labor force by a sufficiently large margin to send the unemployment rate downward to 6.6 percent from 6.7 percent in December. Market expectations had been for the unemployment rate to remain unchanged, he explained.
Expectations about a minimal gain in employment in the month were premised in part on concerns of weakness in the energy sector. The forestry, fishing, and mining component nationally dropped by 8,800 in January although the sector in Alberta was only down by 1,000. A greater 6,400 drop was recorded in Ontario, thereby implying weakness in non-energy natural resources.
The decline in the natural resource sector nationally did not prevent employment in goods-producing industries rising by a solid 9,700 following a 10,200 gain in December. Offsetting increases were led by gains in manufacturing (10,700) and construction (4,700).
Service-producing jobs rose by a solid 25,700, which more than offset a 21,600 drop in December. Expectations of job growth in January had possibly been weighed down as well by the announcement on January 15, 2015 that Target was closing all of its stores in Canada.
“Although this will eventually entail the laying of its approximately 17,000 workers, the lion’s share of the job cuts will likely only occur once existing merchandise has been liquidated that is currently scheduled for late spring or early summer,” said Ferley. “Today’s report showed a modest decline in the trade component of 4,200, although that may have been related to temporary Christmas sales staff being laid off at a slightly greater pace than assumed by the seasonal factors. Gains in services were relatively broadly based although led by a 22,400 jump in the professional, scientific, and technical services component.”
Employment gains were led by Quebec (16,000) and Alberta (13,700) with the main offset in Saskatchewan (-8,400). As a result, the unemployment rate in Quebec dropped to 5.2 percent from 5.3 percent while in Alberta it fell to 4.5 percent from 4.7 percent between January 2015 and December 2014. The unemployment rate in Saskatchewan jumped to 4.5 percent from 3.7 percent during the same period. Employment in Ontario rose by just 1,300 in the month, although this did not prevent the unemployment rate from dropping to 6.9 percent in January from 7.0 percent in December.
“Overall, employment rising strongly, despite some weakening in the natural resource sector, provided some tentative evidence that other areas of the economy are benefiting from lower energy costs and a strong US economy,” said Ferley. “Given the volatility of this series, too much weight should not be placed on a single month’s reading. As well, we believe that the weakness in the energy sector is likely to intensify going forward.
“Thus, the issue becomes can these offsets equally intensify. Our expectation is that the Bank of Canada will undertake another 25 basis point “insurance” cut to the overnight rate to 0.50 percent in the near term to help facilitate it,” he added. “Our forecast assumes that as we move through 2015, the evidence will mount that both exports are responding positively to a strengthening US economy and that a weakening Canadian dollar and consumers are responding positively to lower gasoline prices. This should eventually result in the Bank of Canada reversing these cuts although not likely until 2016.”
SOURCE: RBC Economics press release