Non-farm payrolls rose 157,000 in January, which was less than expected. Benchmark revisions, however, showed that we created significantly more jobs in 2012 than initially reported: some 127,000 more in the last two months of the year alone. Total job gains in 2012 were 2.1 million, some 335,000 more than initially reported for the year. Revisions tend to better capture new business formation and increases in the self-employed than initial estimates.
In January, the largest gains were in retail, construction and healthcare. It is worth noting, however, that retail hiring actually fell before seasonal adjustments were taken into account. The decline was just less than usual. Gains in construction were less than expected, given the demand created by Superstorm Sandy, but still respectable. This is something to watch, as the housing market is critical for a more substantive recovery in the labor market. The gains in healthcare were dominated by a pickup in hiring by physicians, outpatient clinics, hospitals and in-home care. Employment for nurses and at nursing homes actually declined during the month. Nurses, in particular, are being replaced by cheaper technicians across the board in an attempt to reign in healthcare costs. One always worries what that might mean, however, for the quality of care we are receiving.
Losses in employment were concentrated in transportation. Couriers, who see a lot of seasonal hiring because of the holidays, were particularly hard-hit; next up were the airlines, which continue to struggle with margins.
Government continued to contract by 9,000 jobs. Losses were more evenly split, however, between the federal, state and local levels. Cuts at the federal levels are expected to pick up the baton from cuts at the state and local levels as the largest headwind to employment gains in 2013.
Separately, the unemployment rate edged up to 7.9%, which is essentially unchanged, given the margin of error in this data. Moreover annual population adjustments further complicate comparisons because they mean that the January data is not actually comparable to the December data.
That said, the household survey, which captures the unemployment rate, was less encouraging. Employment gains were weaker as the number of unemployed rose marginally. More importantly, the participation rate held at 63.6%, suggesting that we still are not generating enough jobs for those on the sidelines to reengage in the labor force.
Bottom Line: The labor market continues to heal unevenly and not fast enough for those sidelined by the recession. This is of particular concern for the Federal Reserve, especially in light of the high level of fiscal uncertainty we continue to face. Large companies remain particularly reluctant to hire up, despite having ample cash on hand.
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