US Jobs Market Shrugs Off Government Shutdown While Crushing Forecasts

Ahead of the report, some analysts said the partial government shutdown may have distorted some of the figures. However, a Bureau of Labor Statistics official estimated that the shutdown had “no discernable impacts” on the ability to make estimates, though there was some effect on the numbers otherwise. The news triggered a mixed response in the stock market, but Treasury yields soared. This helped make the U.S. Dollar a more-desirable investment, while pressuring dollar-denominated commodities like gold.
James Hyerczyk
U.S. Non-Farm Payrolls Report

U.S. Non-Farm Payrolls for January topped all estimates while wage growth cooled and the partial government shutdown nudged up the unemployment rate, signaling job gains remain healthy without major inflation strains that would raise concerns with Federal Reserve policymakers. The robust headline number surprised economists who have increasingly said they expect growth to slow in 2019. Furthermore, January marked a record 100 consecutive months of job creation.

Headline Job Creation Continues to Amaze

According to a U.S. Labor Department report released on Friday, Non-Farm Payrolls increased by 304,000, the biggest jump in nearly a year. The median estimate called for an increase of 165,000.

December’s huge initially reported gain of 312,000 was chopped down to 222,000, while November’s figure was boosted from 176,000 to 196,000.

On net, that took the two months down by 70,000, bringing the three-month average to 241,000. That’s still well above the trend that would be common this far into the economic expansion dating back 9 ½ years, CNBC said.

Uncertainty Over Rise in Unemployment Rate

The Labor Department data also showed the unemployment rate inched higher to 4 percent versus an estimate of 3.9 percent. It last visited this level in June 2018. Some said, the partial government shutdown may have been responsible for the uptick in the jobless rate. However, officials said federal workers generally were counted as employed during the period because they received pay during the survey week of January 12.

Soft Wage Growth

The news was not all good, though, as the job creation saw soft wage growth, with average hourly earnings rising just 3 cents on the month, or 0.1 percent, well below the 0.3 percent expected gain. Nonetheless, the data had little effect on a year-over-year basis with wage growth still coming showing a 3.2 percent increase. This figure was steady when compared to recent months as well as coming in just below the highest levels of the recovery.

Other News

The average work week remained at 34.5 hours. The labor force participation rate held steady at 63.1 percent while those counted as not in the labor force fell by 639,000 to just over 95 million.

Ahead of the report, some analysts said the partial government shutdown may have distorted some of the figures. However, a Bureau of Labor Statistics official estimated that the shutdown had “no discernable impacts” on the ability to make estimates, though there was some effect on the numbers otherwise.

The most notable effect on the numbers came in the count of those working part-time for economic reasons, often referred to as the underemployed. That total jumped nearly 11 percent to 5.1 million.

Financial Market Response

The news triggered a mixed response in the stock market, but Treasury yields soared. This helped make the U.S. Dollar a more-desirable investment, while pressuring dollar-denominated commodities like gold.

Traders also said that January’s robust jobs report showed that recession worries may be overblown and global economic slowdown fears are not impacting corporate hiring.

“I think really it’s kind of the same story we took away from the jobs report. Even though the Fed committee was really dovish on Wednesday, things domestically are still pretty strong,” said Ben Jeffery, rate strategist at BMO. “This is both producer and consumer sentiment readings at good levels. …It definitely runs counter to what Powell said his concerns were on Wednesday.”

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