Insights and Perspective

 

Insights and Perspective

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The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for January 2022 on Friday, February 4th. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. 

Employment in the U.S. rose by 467,000 jobs. The result is a pleasant surprise given the many signals that this would be a bad month. Geographic Solutions, Inc. and public data from the Department of Labor pointed to a negative job performance of -179,000. The job market at this phase of the recovery has become very hard to predict largely from the public’s changing reactions to Covid-19, including the job application behavior of users on Geographic Solutions sites as well as the job openings posted on those sites. Initial jobless claims from the Labor Department also pointed to a downward blip in employment. Furthermore, job revisions have been enormous in the last two years relative to the size of initial reports. December 2021, to take the most recent example, was revised upward from 199,000 to 510,000 which is much closer to the Geographic Solutions forecast of 493,000. The ADP employment report predicted the private sector shed 301,000 jobs in January. The Wall Street Journal estimate was closer at a 150,000 increase in jobs, but their reporting acknowledged the difficulties of assessing the labor market:

For January, consensus is +150,000 but the range of forecasts is wide and whisper number decidedly negative—Goldman Sachs forecasts a decline of 250,000 jobs, Morgan Stanley -215,000, TD Securities -200,000. Truth is, though, that economists have had a hard time during the pandemic, the consensus has frequently been off the mark and the whisper wildly wrong.

The Geographic Solutions forecast was derived from internal data on the number of job searchers, and applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the U.S. Department of Labor (USDOL). 

The unemployment rate ticked up to 4.0%, below the Geographic Solutions forecast of 4.1% and above the WSJ forecast of 3.9%. The unemployment rate forecast used internal data on the number of job openings, job severances, and the number of applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the USDOL.

Job creation was strongest in Leisure & Hospitality (151,000) and Transportation, & Utilities (132,000). Every major industry except for Construction (-5,000) saw job increases in January. Government employment increased with Local Government Education surging. 

More sectors emerged above their pre-pandemic employment level: Professional & Business Services, Trade, Transportation, & Utilities, and Financial Activities. 

The labor force participation rate increased to 62.2% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment fell 0.2% to 7.1%. Steady unemployment rates with a growing labor force participation rate indicate that the labor market is shaking off some of the slack experienced in the early fall.

The January employment figures along with the revisions in December and November portray a labor market that is healthier than thought on first examination. Additionally, it points to resilience that the jobs market has had during the onset of the Omicron variant. The news should be especially well-received at the Federal Reserve as this gives them more leeway to raise interest rates when arguably inflation has become a greater concern than employment among the public.
 



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