In contrast to the dramatic recent changes in Washington, the January employment report from the Labor Department includes some familiar themes.
They include steady jobs creation and a sort of "Is that all there is" question on worker pay. Ultimately, the desire to put more Americans to work with higher pay is the challenge and the opportunity for the Trump administration.
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Positive developments in the Friday release worth noting:
- Hiring picked up with 227,000 jobs added last month, an acceleration from the revised monthly average of 148,000 jobs added over the previous quarter. Can that continue, perhaps, but we’ll need to see. "The January pace is unlikely to be sustained, and jobs growth will likely fall back into the 150,000 to 200,000 range in the coming months," said Nariman Behravesh, chief economist, IHS Markit.
- Winds of change might be picking up speed in the long-sluggish goods-producing sector, adding 45,000 jobs last month. The biggest contribution came from construction, responsible for 36,000 jobs. But manufacturing with a gain of 5,000 jobs last month faces headwinds between automation and the strong dollar, which prices U.S. goods at a premium.
- More people were working or looking for work. Including some annual changes to the Labor Department’s data management processes, some 584,000 workers entered the workforce in January. That contributed to an increase in the labor force participation rate, helping to explain the slight increase in the jobless rate to 4.8 percent.
On the discouraging side is the wages story. Average hourly earnings are up 2.5 percent over the past year, marking a setback from the showing in December’s initial report. That runs contrary to the continued overall improvement in the job market and the fact that 19 states increased their minimum wages on Jan. 1.
Ironically, the downbeat news on wages could take some pressure off the Federal Reserve in the near-term, since it is eying inflation data closely.
Chair Janet Yellen has liked to remind us that one month’s data should basically be taken with the proverbial grain of salt. Having just opted to keep rates steady, the central bank will get to examine February employment data before the mid-March meeting.
While there’s a great deal of anticipation surrounding steps that President Trump and the GOP-led Congress are expected to take to boost the economy, patience is advised.
Confrontations over trade and immigration could have the unintended consequences of dampening employment prospects, notes Chris Lu, the former Deputy Secretary of Labor in the Obama administration.
“Unfortunately, in its first two weeks, the Trump Administration has already endangered the Obama economic recovery by provoking our trading partners, shutting our doors to immigrants, and creating business and geopolitical uncertainty,” said Lu, now senior fellow at the University of Virginia's Miller Center.
With the details and actual legislation still to come, potential job-creating benefits of tax cuts and spending on improvement of roads and other infrastructure components remain months away.
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