On paper the very strong January jobs report from the US was just as confusing as the weak readings for December and January had been.
So, after several months of being on the high side of the eventual outcome of the monthly jobs report forecasting for the US, economists went low in their estimates for January, and still missed by miles.
For example, on Thursday, Goldman Sachs predicted that the employment report would show a fall of 250,000 jobs – out by three quarters of a million. The market forecast was for 150,000 new job, the actual report showed 467,000.
The January report was solid, not outstanding as many reports and analysis attempted to claim – it showed more consistent job creation over the past year rather than the periods of huge gains and surprising weakness.
Payrolls were also revised higher by 709,000 jobs in November and December, and wages grew at a hot 5.7% year-over-year pace in January – previously around 4.6%.
Adding to the credibility of the data in the January report, economists pointed out that the figures were collected in the first weeks of the year (and month), when coronavirus cases topped 800,000 a day and millions of workers were kept home by positive tests, suspected exposures or child care disruptions.
So the impression was that the jobs market resisted the disruptions and other problems caused by Covid omicron and grew strongly.
Given that, it’s no wonder the coverage was unambiguously positive, but there was a clear reason for improvement to be found in the report from the US of Bureau of Labor Statistics.
In this report, the BLS made the point that it had carried out its usual re-examination of the benchmarks and the seasonal adjustments process to clean up the previous year’s figures (and the Census Bureau played its part by contributing new, updated population estimates for the BLS to use in its surveys).
“As part of the benchmark process, the seasonal adjustment models are also updated. These models remove normal seasonal fluctuations—such as regular employment changes due to major holidays— from the data series, making it easier to observe cyclical and other economic trends.
“Now that there are more monthly observations related to the historically large job losses and gains seen in the pandemic- driven recession and recovery, the models can better distinguish normal seasonal movements from underlying trends.
“As a result, some large revisions to seasonally adjusted data occurred with the updated models; however, these monthly changes mostly offset each other. For example, the over-the- month employment change for November and December 2021 combined is 709,000 higher than previously reported, while the over-the-month employment change for June and July 2021 combined is 807,000 lower,” the BLS said.
Overall, the benchmark process added 217,0000 jobs to the 2021 total – which in a labour market of more than 150 million people, is not very much.
As well, the household survey (which is conducted at the same time along with the Establishment Survey which looks at nonfarm employment, hours and pay) indicated that total employment would have fallen, without updated population estimates from the Census Bureau.
The upshot is that US nonfarm employment has increased by 19.1 million since April 2020 but remains down by 2.9 million, or 1.9%, from its pre-pandemic level in February 2020.
In January, employment growth continued in leisure and hospitality, in professional and business services, in retail trade, and in transportation and warehousing.
Wages rose a strong 5.7% in the year to January, after a 4.7% rise in December. That rise was as much due to the changes from the revisions and new population data as any other factor.
This figure is influenced by employment in low wage occupations. Employment in leisure and hospitality is still 1.8 million (10.3%) under the February, 2020 (pre-pandemic) level, while employment in retail is now 61,000 higher.
The absence of the 1.8 million lower-paid workers means the monthly earnings data will be a little higher than it would have been because more higher-paid people are being employed.
