January Jobs Report: Surprising 227K New Jobs, Better Than Expected
This morning's employment report for January showed a 227K increase in total nonfarm payrolls. The unemployment rate ticked upward from 4.7% to 4.8%. The Investing.com consensus was for 175K new jobs and the unemployment rate to remain at 4.7%. Revisions were made to total nonfarm payrolls for all of 2016.
Here are two excerpts from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:
Total nonfarm payroll employment increased by 227,000 in January, and the unemployment rate was little changed at 4.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in retail trade, construction, and financial activities.
Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. We've added a 12-month moving average to highlight the long-term trend.
The unemployment peak for the current cycle was 10.0% in October 2009. The chart here shows the pattern of unemployment, recessions and the S&P Composite since 1948. Unemployment is usually a lagging indicator that moves inversely with equity prices (top series in the chart). Note the increasing peaks in unemployment in 1971, 1975 and 1982. The mirror relationship appears to be repeating itself with the most recent and previous bear markets.
Now let's take a look at the unemployment rate as a recession indicator, or more specifically the cyclical troughs in the UR as a recession indicator. The next chart features a 12-month moving average of the UR with the troughs highlighted. As the inset table shows, the correlation between the MA troughs and recession starts is remarkably close.
We've added another chart to illustrate the reality of the unemployment rate - the unemployment rate divided by the labor force participation rate.
The next chart shows the unemployment rate for the civilian population unemployed 27 weeks and over. This rate has fallen significantly since its 4.4% all-time peak in April 2010. It is now at 1.2%, up from 1.1% the previous month.