Payrolls were up a solid 257,000 last month and strong upward revisions to prior months’ payroll gains reveal an uptick in the pace of job creation in recent months. Wage growth got a slight bump and the labor force participation rate ticked up as well, in what is a uniformly impressive jobs report, another in steady line of reports showing that the economic recovery has reliably reached the labor market. While we are clearly not yet at a full employment economy, characterized by a very tight fit between the number of job seekers and jobs, we are moving in that direction.
Over the past three months, payroll growth has averaged 336,000 per month. A year ago, the comparable number was 197,000. My patented jobs day smoother, shown below, also captures the recent acceleration in net job creation, as the three month average is notably above that of six and 12 months.
Unemployment ticked up slightly, to 5.7%, as more people entered the job market than found employment. But especially given the accelerated pace of job creation, this is good sign, signaling the potential return (we don’t want to over-interpret one month’s move in this noisy series) to the labor force of sideliners who’ve been waiting for better prospects. The labor force participation rate ticked up 0.2% in January, replacing a decline of the same magnitude in December. At 62.9%, this important indicator has clearly stabilized at about 63%, where it’s been wiggling around for about a year now. That level remains three points below its pre-recession peak, and is thus symptomatic of remaining slack in the job market (there are also still close to 7 million involuntary part-timers who’d like full-time work, another indicator of ongoing slack). Still, its stabilization is good news.
Hourly wages, which fell in December, rose 0.5% in January and were up 2.2% over the past year, compared to 1.9%, Dec/Dec. Given recent gains in weekly hours worked, weekly earnings are up 2.8% over the past year. Moreover, with energy prices holding back inflation, up only 0.7% when last seen, this translates into some of the first solid real wage growth in the recovery.
There is an important caveat here: nominal hourly wage growth is not accelerating in any identifiable way. As I’ll show later today, this result holds over various wage measures. At the same time, as noted, price growth is slowing, and not just “topline” inflation, but also core inflation, the Fed’s preferred measure.
Thus, from the perspective of Federal Reserve policy makers, the current economy is building up some pretty solid “Goldilocks” credentials: GDP growth is stable at around trend, the job market is reliably tightening, yet neither wage nor price growth are signaling inflationary pressures. It is thus critically important to recognize that we are not yet at full employment, and even if we get there, we’ll need to stay there to repair the considerable residual damage still with us from years of deep recession followed by what began as a weak recovery.
Source: BLS, my analysis.
[Data note: today’s report included various revisions to both the surveys of households and firms. The payroll survey annual benchmark revision raised the level of payroll employment slightly, by 91,000, as of March of last year. The household survey revisions did not affect changes in rates cited above.]