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U.S. Job Gains Show Employers Shrugged Off Government Shutdown U.S. Job Gains Show Employers Shrugged Off Government Shutdown
(about 4 hours later)
The Labor Department released its monthly estimate of hiring, unemployment and wages for January on Friday morning. The report provided an important snapshot of the American economy. Add the recent government shutdown to the list of things that didn’t slow the American job market.
304,000 jobs were added last month. Economists had expected a gain of about 172,000. Over the past eight years, the American economy has endured trade tensions, debt-limit standoffs, foreign-policy crises and all manner of natural disasters. Through it all, companies kept on hiring.
The unemployment rate rose to 4.0 percent, from 3.9 percent. The resilience continued in January as employers shrugged off both the monthlong shutdown and fears of an economic slowdown to add 304,000 jobs, far more than forecasters had anticipated. The report from the Labor Department marked the 100th consecutive month of job gains, more than double the previous record.
Average earnings rose 3 cents per hour in December, and were up 3.2 percent from a year earlier.
December’s job growth was revised sharply downward. The government now says employers added 222,000 jobs in the final month of the year, down from an earlier estimate of 312,000.
The government shutdown may have hurt the economy, but there’s no sign it slowed down the United States’ record-setting job market.
January’s growth means that American employers have added jobs for 100 consecutive months, extending a record run. The unemployment rate is near a multidecade low, and wages — long a weak point — are rising.
The shutdown idled hundreds of thousands of federal workers for much of January, and left hundreds of thousands of others working without pay. Ripple effects hit everyone from unpaid government contractors to Washington lunch spots that lost business.
But the disruption doesn’t appear to have dissuaded private-sector employers from continuing their strong pace of hiring. And furloughed federal workers counted as employed for the purposes of government statistics.
Even before the lapse in funding, economists were growing nervous that the United States’ decade-long expansion could be nearing its end. The shutdown not only added to those fears, it also shuttered the Commerce Department, which produces a lot of the data forecasters rely on. (The Labor Department, which produces the jobs report, stayed open.)
But if companies are getting nervous, that isn’t yet leading them to hold off on hiring.
“This jobs report is showing no evidence of an economy slowing, certainly not falling into recession,” said Michelle Meyer, chief United States economist for Bank of America Merrill Lynch. “It’s still a tight labor market. Employers are still actively looking for jobs, and with wages ticking up, it looks like workers are getting some more bargaining power.”“This jobs report is showing no evidence of an economy slowing, certainly not falling into recession,” said Michelle Meyer, chief United States economist for Bank of America Merrill Lynch. “It’s still a tight labor market. Employers are still actively looking for jobs, and with wages ticking up, it looks like workers are getting some more bargaining power.”
The monthlong shutdown put an $11 billion dent in the economy, according to the Congressional Budget Office. Some private estimates put the costs even higher. Friday’s report does not mean the economy escaped the shutdown unscathed. The Congressional Budget Office this week estimated that the funding lapse shaved $11 billion off total output, $3 billion of which will never be recovered. Those totals don’t include indirect costs from permits not issued, loans not processed and flights not taken because of delays at airports.
That damage was hard to see clearly in Friday’s job figures, however. Federal workers will all receive back pay for the days the government was closed, whether or not they were required to work. As a result, the official figures counted all of them as having been on government payrolls in January, even if they weren’t actually on the job. The effects on spending, investment and output should show up in other government reports, some of which were themselves delayed by the shutdown.
Government contractors generally won’t receive back pay, so if they didn’t work, they weren’t counted. Ditto for other private-sector workers who were laid off (or weren’t hired) because of the shutdown. But most economists expected those effects to be small in the context of an economy that employs more than 150 million people. Sure enough, private employers added nearly 300,000 jobs last month. Those disruptions didn’t deter employers, however. The unemployment rate rose slightly, to 4 percent, at least partly because of the idling of hundreds of thousands of federal workers. But hiring in the private sector was strong and broad-based, with manufacturers, retailers and construction companies all adding jobs. Wage growth, which has picked up in recent months after years of sluggish gains, remained solid, and the strong labor market continued to pull in workers from the sidelines.
The shutdown does help explain why the unemployment rate ticked up to 4 percent in January. Unlike the monthly hiring figures, which come from a survey of employers and are based on their payrolls, the unemployment rate is based on a survey of households. In that survey, 175,000 more people than in the previous month reported themselves as being unemployed because of a “temporary layoff” — a total that included government workers. The Labor Department did revise downward its estimate of December hiring by 90,000 jobs, an unusually large adjustment. But the strong growth in January, combined with upward revisions to earlier months, meant that the pace of hiring, averaged over six months, actually rose.
That combination of strong hiring and modest wage gains has put the economy on a strong, sustainable footing. More jobs means more income for consumers, which leads to more spending, and in turn more hiring.
“The virtuous cycle continues,” said Michael Gapen, chief United States economist for Barclays. “What’s kept this recovery going, what’s kept the U.S. economy so resilient to all the things that have clouded the outlook, is a virtuous cycle of a continuously growing U.S. labor market.”
None of the threats to the economy over the past several years have disrupted that central pattern. The shutdown, for example, caused ripple effects throughout the private sector, but companies and businesses also found ways to cope. Ben Herzon, an economist for Macroeconomic Advisers, a forecasting firm, said that as a result, the shutdown’s economic impact might be more muted than simple economic models might suggest.
“The economy is resilient,” Mr. Herzon said. “People and businesses find a way to work around these disruptions. People want to buy stuff, and businesses want to find a way to make that happen.”
James Diana and his wife started JD’s Canine Cruiser, a dog-walking and pet-sitting business in the Virginia suburbs of Washington, in 2012. The area’s strong economy has allowed them to expand the business and bring on more contract employees, many of whom are at-home parents and others who might not find work in a less robust economy.
Many of Mr. Diana’s customers are federal employees or contractors, and the shutdown hit his business hard. He said cancellations in January were roughly double their normal level, costing him thousands of dollars in lost business. Government workers, he noted, will get back pay, but that won’t help him.
“That actually is lost income for us,” he said. “They’re going to get their money back. I’m not going to get my money back.”
Mr. Diana said he pared his own spending, but he also tried to fill in the gap in his business. He doubled down on efforts to find new customers, including on Thumbtack, an online marketplace for hiring people to complete tasks.
“It forced me to go out there and get more clients,” he said — to “really get out there and start cranking.”
The relative invisibility of the shutdown in Friday’s data wasn’t a total surprise. Because federal workers will receive back pay, the figures counted all of them as having been on payrolls in January, even if they weren’t actually on the job.
Government contractors generally won’t receive back pay, so if they didn’t work, they weren’t counted. Ditto for other private-sector workers who were laid off (or weren’t hired) because of the shutdown. But most economists expected those effects to be small in an economy that employs more than 150 million people. Sure enough, private employers added nearly 300,000 jobs last month.
The shutdown does help explain why the unemployment rate ticked up in January. Unlike the monthly hiring figures, which come from a survey of employers and are based on their payrolls, the unemployment rate is based on a survey of households. In that survey, 175,000 more people than in December reported themselves as being unemployed because of a “temporary layoff” — a total that included government workers.
“Where’s your shutdown impact? There it is,” said Brett Ryan, an economist for Deutsche Bank in New York. “It just showed up in the unemployment rate.”“Where’s your shutdown impact? There it is,” said Brett Ryan, an economist for Deutsche Bank in New York. “It just showed up in the unemployment rate.”
It is possible, of course, that hiring would have been even stronger absent the shutdown. Economists have become increasingly concerned in recent months about a range of possible threats to the United States economy. Growth has slowed in Europe and China; trade tensions are threatening the American manufacturing sector; stock market jitters could make consumers less likely to spend; and the shutdown, of course, could erode confidence among consumers and businesses.
“It’s a hard counterfactual to figure out,” said Julia Pollak, an economist for the online job site ZipRecruiter.
Economists have become increasingly concerned in recent months about a range of possible threats to the United States economy. Growth has slowed in Europe and China; trade tensions are threatening the American manufacturing sector; stock market jitters could make consumers less likely to spend; and the shutdown, of course, could erode confidence among both consumers and businesses.
None of that, however, has yet affected the job market.None of that, however, has yet affected the job market.
“There’s a caution or concern in people’s voices, but it hasn’t turned into action,” said Teresa Carroll, executive vice president for Kelly Services, a staffing firm. “Anybody in a hiring situation in a company is probably waiting for that next shoe to drop, but it doesn’t mean they’re stopping.”“There’s a caution or concern in people’s voices, but it hasn’t turned into action,” said Teresa Carroll, executive vice president for Kelly Services, a staffing firm. “Anybody in a hiring situation in a company is probably waiting for that next shoe to drop, but it doesn’t mean they’re stopping.”
It isn’t just Friday’s data that looked strong. Claims for unemployment insurance recently hit a nearly 50-year low. Paychecks are growing — data released Thursday showed that wages and salaries rose 3.1 percent in the final three months of 2018 compared to a year earlier, the best mark since the recession ended a decade ago. And employers report in private surveys that they plan to keep on adding workers — at least if they can find them. It isn’t just Friday’s data that looked strong. Claims for unemployment insurance recently hit a nearly 50-year low. Paychecks are growing — data released Thursday showed that wages and salaries rose 3.1 percent in the final three months of 2018 compared with a year earlier, the fastest growth since the recession ended a decade ago. And employers report in private surveys that they plan to keep on adding workers, at least if they can find them.
“The underlying foundation hasn’t changed,” said Becky Frankiewicz, president of ManpowerGroup North America, a staffing firm. She said what she was hearing from clients was “nice, robust optimism continuing around hiring.”“The underlying foundation hasn’t changed,” said Becky Frankiewicz, president of ManpowerGroup North America, a staffing firm. She said what she was hearing from clients was “nice, robust optimism continuing around hiring.”
As the unemployment rate has fallen, companies have had to work harder to find workers. Ms. Frankiewicz said companies are increasingly offering training, rethinking job requirements and letting employees work remotely. They are also raising pay — a factor that may be drawing more workers off the sidelines. The labor force grew by nearly half a million people in January. As the unemployment rate has fallen, companies have had to work harder to find workers. Ms. Frankiewicz said companies were increasingly offering training, rethinking job requirements and letting employees work remotely.
“If wages are rising, that gives a greater incentive for folks to come back into the labor force and look for jobs,” Ms. Meyer said. They are also raising pay — a factor that may be attracting people who had previously stopped looking for work. The labor force grew by nearly half a million people in January, suggesting that more Americans are willing and able to work than the low unemployment rate might indicate.
Earlier this week, the Federal Reserve signaled that it was pressing “pause” on plans to continue raising interest rates this year. Jerome H. Powell, the Fed’s chairman, said “the case for raising rates has weakened somewhat” because of low inflation and slowing global growth. “If wages are rising, that gives a greater incentive for folks to come back into the labor force and look for jobs,” Ms. Meyer of Bank of America Merrill Lynch said.
The Federal Reserve had signaled this week that it was pressing “pause” on plans to continue raising interest rates this year. Jerome H. Powell, the Fed’s chairman, said that “the case for raising rates has weakened somewhat” because of low inflation and slowing global growth.
Friday’s report seemed to offer a sharp counterpoint to those comments. The economy, at least in the United States, still seems strong, and wage growth has been picking up.Friday’s report seemed to offer a sharp counterpoint to those comments. The economy, at least in the United States, still seems strong, and wage growth has been picking up.
Still, economists said the report was unlikely to lead the Fed to reverse course yet again.Still, economists said the report was unlikely to lead the Fed to reverse course yet again.
“This is just one piece of news,” Mr. Ryan said. “They’re going to have to see several more of these before they’re comfortable hiking again.” “This is just one piece of news,” Mr. Ryan of Deutsche Bank said. “They’re going to have to see several more of these before they’re comfortable hiking again.”
For President Trump, whose approval ratings have been battered by the shutdown, the Russia investigation and other factors, Friday’s data was welcome news. Both Mr. Trump’s re-election campaign and the White House issued news releases highlighting the jobs figures, and the president hailed the report on Twitter.