January jobs report indicates stellar start to 2020

The recent employment roller coaster continued with the January 2020 jobs report, which delivered unexpectedly strong numbers after December’s disappointing returns.

According to the U.S. Bureau of Labor Statistics, nonfarm payrolls grew by 225,000 positions in January, surpassing economists’ expectations of about 158,000. The unemployment rate inched higher to 3.6%, although part of the incremental increase can be attributed to the growth in the labor-participation rate. That figure rose 0.2 percentage points to 63.4%, tying its highest level since the summer of 2013.

Mark Zandi, chief economist for Moody’s Analytics, postulated earlier in the week that uncharacteristically mild January weather likely provided “a significant boost” to last month’s strong employment numbers. This was evident in several blue-collar and leisure employment sectors — with construction, transportation and warehousing, and hospitality each posting sizable job gains. Construction employment in January was particularly strong and grew by 44,000, a big plus for the housing industry.

“Last month’s increase in construction employment was a positive development for housing, as the homebuilding sector has been challenged by labor shortages and high costs,” said Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association.

“Another bright spot is January’s 1.9% year-over-year gain of residential construction labor, signaling that the productivity of construction labor is likely to increase,” noted Odeta Kushi, deputy chief economist at First American Financial Corp.

“This is a tailwind for the housing market, as finding ways to increase the productivity of construction workers is critically important to alleviating the labor-shortage challenge and the gap between household formation and homebuilding.”

Wage growth, which had slowed in December 2019, bounced back somewhat in January, picking up 0.2 percentage points to start the year at 3.1%. Kan called the increasing wage growth “a welcome sign for households looking to buy a home this spring.”

And January’s jobs report also came with upward revisions to job gains of the previous two months. November 2019 payrolls were revised upwardly by 5,000 jobs, while the December 2019 figure gained 2,000.

The picture wasn’t entirely rosy. The slumping manufacturing sector, for example, continued to falter and lost 12,000 jobs in January. That decrease — about 10,000 jobs more than economic forecasts — marked the third time in four months that the manufacturing sector shed jobs. And retail trade lost 8,300 jobs, reflecting the seasonal pullback that comes after December’s annual holiday hiring surge.

January’s jobs report also arrived early enough to dodge potentially considerable downward pressures, such as the impact of the ongoing global coronavirus outbreak and layoffs in the aerospace sector due to Boeing suspending production of its 737 MAX aircraft. Both of these factors will slow job growth over the first few months of the year, Zandi said.

On the whole, however, January’s jobs data painted a picture of economic strength that bodes well for the continued health of the housing market.

“Build it and they will buy it,” Kushi said. “The housing market is being buoyed by lower mortgage rates, favorable demographics and the continued yearly growth in wages, which contributes to higher household income and stronger purchasing power.”


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