January jobs report: Economy added 49,000 payrolls as unemployment rate dropped to 6.3%
The U.S. economy resumed adding back more jobs than it lost in January, as easing stay-in-place restrictions and fiscal stimulus measures out of Washington alleviated some of the pressure on the labor market. However, the number of jobs regained fell short of expectations, and the number of jobs lost in December was revised to be greater than previously reported.
The U.S. Department of Labor released its monthly jobs report Friday morning at 8:30 a.m. ET. Here were the main results expected from the report, compared to consensus estimates compiled by Bloomberg:
Non-farm payrolls: +49,000 vs. +105,000 expected and a revised -227,000 in December
Unemployment rate: 6.3% vs. 6.7% expected and 6.7% in December
Average hourly earnings, month-over-month: 0.2% vs. 0.3% expected and a revised 1.0% in December
Average hourly earnings, year-over-year: 5.4% vs. 5.0% expected, 5.1% in December
Friday’s reported also reflected downward revisions to the previous two months’ payrolls. November’s non-farm payrolls were revised down by 72,000 to 264,000, and December’s change was revised down by 87,000 to a loss of 227,000 jobs. To that end, some speculated that the jobs report could bolster the case for additional fiscal stimulus to support the virus-stricken economy. President Joe Biden said on Friday that the data warranted a more aggressive Congressional response via virus-relief aid.
And while the unemployment rate unexpectedly declined in January, the drop coincided with a tick lower in the labor force participation rate.
In January, the badly beaten-down restaurant and travel industries shed more jobs, adding to steep December losses. Leisure and hospitality jobs dropped by 61,000 in January, following a plunge of more than 500,000 at the end of last year. That left the leisure and hospitality with a total deficit of more than 4 million jobs since before the pandemic, comprising a significant portion of the nearly 10 million jobs lost on net since February 2019.
Some other industries reversed some recent gains. Retail trade payrolls fell by 37,800 after gaining 134,900 in December around the holidays, and healthcare and social assistance payrolls fell by more than 40,000 after gaining nearly that amount in December. In the goods-producing sector, manufacturing jobs fell by 10,000 after increasing by 31,000 in December.
“The details were weaker than the headline figures suggest. Whereas the downwardly-revised 227,000 fall in payrolls in December was driven entirely by the leisure and hospitality sector, the weakness last month was more widespread,” Andrew Hunter, senior U.S. economist for Capital Economics, wrote in a note Friday.
Other industries, however, extended job gains. Notably, professional and business services added nearly 100,000 jobs after adding back 156,000 in December. And wholesale trade payrolls rose by more than 14,000 after a rise of 15,500 in December.
Other measures in the January jobs report pointed to some stabilization in labor market conditions. The number of so-called permanent job losers held steady at about 3.5 million in January, though that remained 2.3 million higher than from February 2019. And the number of individuals on temporary layoffs decreased in January to 2.7 million, coming down precipitously from a pandemic-era high of 18.0 million from April.
A number of other new economic data topped expectations this week, offering hope of a stronger and faster than expected labor market recovery. ADP reported that private payrolls jumped by 174,000 in January, or more than double the consensus estimate, and new weekly jobless claims improved to a two-month low at the end of January.
Still, the timing of the survey period for the monthly January jobs print may mean that Friday’s report understated the degree of improvement in the labor market in just the past few weeks. The survey week for the monthly jobs report took place during the week including 12th of the month, or around the time when initial jobless claims spiked to a five-month high of more than 900,000. Claims have since retreated from those levels.
“Hiring will pick up as restrictions are relaxed but gains will be stronger once the economy can fully reopen,” Rubeela Farooqi, chief U.S. economist for High Frequency Economics, said in an email Friday. “Until then, generous fiscal support will provide a safety net for households and businesses.”
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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