The Labor Department issues its monthly snapshot of U.S. hiring on Friday. Here are six things to consider from the January jobs report.
Was it weather, or something more serious?
The Labor Department's December employment reading, issued a month ago, showed hiring was in the deep freeze. But recession fears were dismissed because bad winter weather had helped to put a chill on jobs. The trouble is, January's weather wasn't any better, suggesting the jobs report is at risk of being frosty. "January was in many respects worse, in that the temperatures were more frigid," says economist Alan MacEachin with the Navy Federal Credit Union. "Absolutely, it's going to have an impact. The question is how much."
Is there growing evidence of slowing growth?
This week's closely watched Institute for Supply Management reading on manufacturing was weaker than expected. Putting some credence in the "something more serious" argument: Economist Lindsey Piegza with Sterne Agee said in a note that the "weakness was widespread ... making it difficult for weather alone to explain away the slump in activity at the start of the year." Also, sales of new cars and homes have been slowing. All of that taken together suggests to MacEachin that growth in the current quarter could be less than 2.5 percent.
What about revisions?
Not only will the Labor Department issue revised hiring numbers for previous months, but Friday also brings annual "benchmark" revisions to the portion of the survey telling us about job creation, going back a year or so. With big revisions either up or down, we could be looking at a suddenly different view of what's been happening recently. Economist Robert Brusca of Fact and Opinion Economics expects "a real, real wild guess."
Finding much extra money in your pocket?
If you are like most people, probably not so much. Beneath the bolder headlines of the employment report, the gauge of average hourly earnings is mined for signs whether workers are pocketing any extra money. Over the previous year, incomes reported by the Labor Department rose less than 2 percent. "In order for incomes to improve, you need to have a higher quality of job that pays more, or you need to have more jobs overall, or you need to have wage inflation," says Brusca. The prospects for all of those factors are pretty poor, he adds.
A 6.5 percent jobless rate: Are we there yet?
The December jobless rate was 6.7 percent, close to the level previously cited by the Federal Reserve where it could consider raising short-term interest rates. Economist MacEachin says much of the unemployment rate decline has been because of declining labor force participation -- in other words, fewer people looking for work -- not because of actual job creation. The Fed is now vowing to keep rates low "well past the time that the unemployment rate declines below 6.5 percent." That's assuming inflation remains under control. Keep in mind, the Fed will get yet another jobs report in early March before its next policy-setting meeting.
So, what will the Fed think, longer-term?
Despite the recent pullback in the stock market, reflecting emerging markets distress, the central bank now headed by Janet Yellen appears to be committed to further declines in monthly bond purchases, based on what it calls "substantial improvement" in the job market. Even Federal Reserve Bank of Richmond President Jeffrey Lacker this week said he expects "further reductions in the pace of purchases at upcoming meetings." Lacker has often dissented in monetary policy votes held by the Federal Open Market Committee, so his personal confidence about the longer-term outlook is worth noting.
Do think the economy is taking a bit of a pause, or is the weather making it look worse than it might otherwise appear?
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