The Labor Department released its monthly estimate of hiring, unemployment and wages for January on Friday morning. The report provided an important snapshot of the American economy.
Average earnings rose 3 cents per hour in December, and were up 3.2 percent from a year earlier.
December’s job growth was revised sharply downward. The government now says employers added 222,000 jobs in the final month of the year, down from an earlier estimate of 312,000.
The government shutdown may have hurt the economy, but there’s no sign it slowed down the United States’ record-setting job market.
January’s growth means that American employers have added jobs for 100 consecutive months, extending a record run. The unemployment rate is near a multidecade low, and wages — long a weak point — are rising.
The shutdown idled hundreds of thousands of federal workers for much of January, and left hundreds of thousands of others working without pay. Ripple effects hit everyone from unpaid government contractors to Washington lunch spots that lost business.
But the disruption doesn’t appear to have dissuaded private-sector employers from continuing their strong pace of hiring. And furloughed federal workers counted as employed for the purposes of government statistics.
Even before the lapse in funding, economists were growing nervous that the United States’ decade-long expansion could be nearing its end. The shutdown not only added to those fears, it also shuttered the Commerce Department, which produces a lot of the data forecasters rely on. (The Labor Department, which produces the jobs report, stayed open.)
But if companies are getting nervous, that isn’t yet leading them to hold off on hiring.
“This jobs report is showing no evidence of an economy showing, certainly not falling into recession,” said Michelle Meyer, chief United States economist for Bank of America Merrill Lynch. “It’s still a tight labor market. Employers are still actively looking for jobs, and with wages ticking up, it looks like workers are getting some more bargaining power.”
A Hidden Shutdown?
The monthlong shutdown put an $11 billion dent in the economy, according to the Congressional Budget Office. Some private estimates put the costs even higher.
That damage was hard to see clearly in Friday’s job figures, however. Federal workers will all receive back pay for the days the government was closed, whether or not they were required to work. As a result, the official figures counted all of them as having been on government payrolls in January, even if they weren’t actually on the job.
Government contractors generally won’t receive back pay, so if they didn’t work, they weren’t counted. Ditto for other private-sector workers who were laid off (or weren’t hired) because of the shutdown. But most economists expected those effects to be small in the context of an economy that employs more than 150 million people.
The unemployment rate is a different story. Unlike the monthly hiring figures, which come from a survey of employers and are based on their payrolls, the unemployment rate is based on a survey of households. In theory, furloughed government workers should have counted as temporarily unemployed in the survey. During the last extended government shutdown, in 2013, however, some federal workers incorrectly recorded themselves as being absent from work, not unemployed.
Adding to the challenge: December’s employment numbers were unusually strong, making a January comedown likely even without the shutdown.
“It’s a hard counterfactual to figure out,” said Julia Pollak, an economist for the online job site ZipRecruiter.
The Big Picture
For all the uncertainty, there is little reason to doubt the fundamental strength of the job market.
Claims for unemployment insurance recently hit a nearly 50-year low. Paychecks are growing — data released Thursday showed that wages and salaries rose 3.1 percent in the final three months of 2018 compared to a year earlier, the best mark since the recession ended a decade ago. Once-struggling sectors like manufacturing and retail added jobs in 2018.
“The underlying foundation hasn’t changed,” said Becky Frankiewicz, president of ManpowerGroup North America, a staffing firm. She said what she was hearing from clients was “nice, robust optimism continuing around hiring.”
But there are hints of trouble. The manufacturing sector weakened in December, and many economists expect a further slowdown if the Trump administration imposes new tariffs on China this year. Consumer confidence dropped sharply in January, and it isn’t clear how quickly it will bounce back given the threat of another shutdown looming just weeks away.
So far, those fears haven’t hurt the labor market. But another shutdown or other bad news could lead companies to pull back.
“There’s a caution or concern in people’s voices, but it hasn’t turned into action,” said Teresa Carroll, executive vice president for Kelly Services, a staffing firm. “Anybody in a hiring situation in a company is probably waiting for that next shoe to drop, but it doesn’t mean they’re stopping.”