The Weather is Cold but Employment is Hot, Hot, Hot

Main content

There is no polar vortex when it comes to jobs. The U.S. economy added 304,000 jobs in January, far surpassing expectations. December was revised down significantly to 222,000, but the three-month moving average is 241,000, giving recession fears the deep freeze for now. Looking under the covers, there was more good news. Wage growth is now firmly and consistently inching higher, up 3.2% year-over-year and luring more people back into the work force.

At 63.2%, the labor force participation rate is the highest it’s been since 2013 and the additional workers in the workforce pushed the unemployment rate up slightly to 4.0%. The leisure, hospitality, education, health and construction sectors showed the highest increases in new jobs. Despite the ultra-low employment rate, inflation is still not an issue. Why? We are still in a low growth global environment. In addition, the last two decades have shown the feedback loop between inflation and employment to be weak.

Other data released today also were robust: the ISM manufacturing index surprised on the upside, coming in at 56.6, and consumer sentiment ticked up. It makes you wonder what the economic data would look like without a government shutdown and ongoing trade turmoil. The patient Federal Reserve is in wait and see mode, looking for more data. We don’t see an interest rate hike in the near future but if we see a rate hike this year it will be for the right reason — higher growth.

Please watch the unemployment rate on page 64 of the Global Perspectives book.

Footer content