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Economy in Brief

U.S. Payrolls Show Unexpected Strength in January; Earnings Improve but Jobless Rate Edges Higher
by Tom Moeller  February 4, 2022

• Annual payroll employment revisions substantially lift recent job gains.

• Earnings growth continues to strengthen.

• Jobless rate edges higher from two-year low.

The job market remains hot. Nonfarm payroll employment increased 467,000 in January (4.6% y/y) following a 510,000 December rise, revised from 199,000 reported last month. The increase in November payrolls was similarly strengthened to 647,000 from 249,000. Despite these gains, the level of payroll jobs remained 1.9% below its peak in February 2020. A 175,000 rise in January payrolls had been expected in the Action Economics Forecast Survey. Benchmark revisions to payroll numbers suggest that the job market is holding up despite the Omicron surge.

Average hourly earnings increased 0.7% in January following a 0.5% December increase, revised from 0.6%. The 5.7% y/y rise is approaching the most recent high of 6.7% in May 2020. A 0.5% monthly gain had been expected for January.

The unemployment rate rose to 4.0% in January from 3.9% in December. A 3.9% rate had been expected. Employment in the household survey increased 1.199 million last month following a 651,000 December rise. The labor force rose 1.393 million after increasing 168,000 in December. The overall unemployment rate, including those who were marginally attached or working part-time for economic reasons, fell to 7.1% last month from 7.3% in December. It was the lowest level since February of 2020 and compared to a recession high of 22.9% in April 2020.

The strength in payroll employment last month was led by private service sector hiring which increased 440,000 following a 441,000 December gain, revised from 157,000. November's rise was lifted to 528,000 from 198,000. Leisure & hospitality sector jobs rose 151,000 (19.4% y/y). The level of hiring in professional & business sector employment improved 86,000 (5.4% y/y) while temporary help employment improved 26,300 (10.6% y/y). Trade, transportation & public utilities employment rose 132,000 last month (3.9% y/y) as hiring in retail trade increased 61,400 (3.2% y/y). Education & health services employment rose 29,000 (2.2% y/y). The number of information services jobs increased 18,000 (6.4% y/y) and financial sector employment gained 9,000 (1.6% y/y).

Government sector payrolls rose 23,000 in January (1.5% y/y) following a 7,000 December increase, revised from a 12,000 decline. Local government employment rose 33,000 (2.2% y/y) but the number of state government jobs weakened 9,000 (+0.6% y/y), off for the sixth month in the last seven. Federal government payrolls eased 1,000 (-0.2% y/y) following a 9,000 decline.

Factory sector employment rose a lessened 13,000 last month (3.1% y/y), the weakest increase since a decline in April 2021. Construction sector payrolls fell 5,000 (+2.1% y/y) in January following strong gains in each of the prior four months. Employment in the mining & logging sector weakened 4,000 last month (+6.1% y/y), down for the first month since February 2021.

Average hourly earnings in the private sector increased 0.7% in January, the strongest increase since December 2020. Information sector earnings surged 1.3% (2.7% y/y) while earnings in education & health services increased 0.8% (6.8% y/y). Financial sector pay also rose 0.8% (4.8% y/y) and professional & business service sector earnings gained 0.8% as well (6.9% y/y). Earnings in the leisure & hospitality sector improved 0.1% (13.0% y/y). Construction sector earnings firmed 0.6% (5.1% y/y) while factory sector pay improved 0.6% (5.1% y/y).

The length of the private sector average workweek fell sharply to 34.5 hours in January. The financial sector workweek weakened to 37.3 hours from 37.7 hours early last year. The information sector workweek held steady at 36.9 hours in January. Hours-worked in the professional & business service sector held at 36.7 hours for the fifth straight month and the education & health services workweek was stable at 33.4 hours. The leisure & hospitality workweek fell sharply to 25.8 hours from 26.3 in October. The factory sector workweek slipped to 40.2 hours from 40.3 hours. The construction workweek declined sharply to 38.7 hours, the lowest level since June 2021.

From the household employment survey, the higher 4.0% unemployment rate in January occurred as the labor force participation rate surged to 62.2% from 61.9%, though it remained below the 63.4% high in January and February of 2020. The participation rate for teenagers rose to 36.6%, but for individuals aged 20-24, it slipped to 71.1%. For workers aged 25-54, the rate edged higher to 82.0% but remained below the January 2020 high of 83.1%. For men aged 25-54, the rate rose to 88.2%. For women of that age, the participation rate increased to 76.0%. It has been trending higher since April 2020 when it was 73.5 hours. For workers aged 55 & over, the participation rate rose sharply to 39.1%, the highest level since August 2020.

The employment/population ratio for all workers rose to 59.7% in January and has been trending higher since early 2020. It nevertheless remained well below the February 2020 high of 61.2%. A greatly increased 23.938 million persons worked at home last month because of the coronavirus, although that was down 30.6% y/y.

The average duration of unemployment fell sharply to 24.6 weeks in January and stood below the high of 31.6 weeks in June of last year. The median unemployment duration also fell sharply to 10.1 weeks and remained below a recent high of 19.6 weeks in June of last year.

The teenage unemployment rate held at 10.9% last month, well below the record 32.6% in April of 2020. The rate for workers aged 20-24 rose slightly to 7.3% in January. For workers aged 25-54, the rate held at 3.5%, significantly below the April 2020 high of 12.8%. For those over 55, the jobless rate rose slightly to 3.1%.

By educational attainment, the rate of unemployment of workers without a high school diploma rose sharply in January to 6.3% but remained below the 9.0% rate one year earlier. High school graduates without any college were steady 4.6% unemployed last month, well below the April 2020 high of 17.6%. Those with some college but no degree were 3.6% unemployed, down sharply from the April 2020 peak of 15.3%. College graduates saw their unemployment rate rise slightly to 2.3% last month, just above the 1.9% low in February of 2020.

The employment & earnings data are collected from surveys taken each month during the week containing the 12th of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.

Employment (SA, M/M Change, 000s) Jan Dec Nov Jan Y/Y 2021 2020 2019
Payroll Employment 467 510 647 4.6% 2.8% -5.8% 1.3%
 Previous Estimate -- 199 249 -- -- --
  Manufacturing 13 32 48 3.1 1.5 -5.1 1.0
  Construction -5 26 47 2.1 2.2 -3.2 2.8
  Private Service-Producing 440 441 528 5.7 3.6 -6.6 1.4
  Government 23 7 20 1.5 0.1 -2.8 0.7
Average Weekly Hours - Private Sector 34.5 34.7 34.8 35.0 34.8 34.6 34.4
Private Sector Average Hourly Earnings (%) 0.7 0.5 0.4 5.7 4.2 4.9 3.3
Unemployment Rate (%) 4.0 3.9 4.2 6.4 5.4 8.1 3.7
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