U.S. Payroll Employment Gain Slows but Jobless Rate Eases in January

Nonfarm payrolls increased 143,000 (1.3% y/y) in January after rising 307,000 in December, revised from 256,000, and 261,000 in November, revised from 212,000. Expectations had been for a 165,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 237,000 in January, up from 204,000 in December and the highest since March 2023.

Average hourly earnings increased 0.5% last month (4.1% y/y) following a 0.3% December rise and a 0.4% November gain. Earnings growth of 4.1% y/y remained up from 3.6% in July, but below the 5.9% high in March 2022. A 0.3% January increase had been expected.

The unemployment rate, measured in the household survey, eased to 4.0% in January from 4.1% in December. The Action Economics Forecast Survey expected 4.1%. It reached a low of 3.4% in April of 2023. Household employment rose 234,000 in January, when adjusted for population control effects. The population-adjusted labor force rose 91,000.

In the payroll survey, private-sector employment rose 111,000 in January (1.3% y/y) following a 223,000 December gain. Construction sector employment increased 4,000 (2.3% y/y) last month after rising 13,000 in December. Factory sector payrolls gained 3,000 (-0.7% y/y) after falling 12,000 in December.

Private service-producing employment increased 111,000 (1.5% y/y) last month after increasing 275,000 in December. Increases varied greatly amongst service sector categories. Private education & health service jobs rose 61,000 (3.8% y/y) while trade, transportation & utilities employment rose 38,000 (0.9% y/y). Financial activities jobs rose 7,000 (0.7% y/y) and information sector employment rose 2,000 last month (-0.4% y/y). Leisure & hospitality employment fell 3,000 (+1.8% y/y) while professional & business service jobs declined 11,000 (-0.2% y/y).

Government sector payrolls increased 32,000 in January (1.9% y/y) after rising 34,000 in December. Local government jobs improved 21,000 last month (1.8% y/y) while state government employment rose 2,000 (2.4% y/y). The number of federal government jobs rose 9,000 (1.5% y/y).

The 0.5% January rise in private-sector average hourly earnings reflected a 0.3% gain (4.0% y/y) in the goods-producing sector. Earnings in construction improved 0.3% last month (4.1% y/y) as did factory sector earnings (3.9% y/y). In the services sector, earnings rose 0.5% 4.1% y/y after rising 0.3% in December. Information sector earnings strengthened 1.2% (5.2% y/y) and professional & business service-sector earnings rose 0.3% (5.1% y/y). Trade, transportation and utilities pay jumped 0.5% (2.7% y/y). Leisure & hospitality earnings rose 0.4% (3.7% y/y). Financial sector earnings increased 0.9% (4.5% y/y) while private education & health services earnings increased 0.4% (4.4% y/y).

The length of the average workweek in the private sector fell sharply to 34.1 hours last month from 34.2 hours in December. The workweek in the goods-producing sector eased to 39.6 hours, compared to 39.7 hours in the previous two months. The construction sector average workweek slipped to 38.7 hours from 38.8 hours. The factory sector workweek slipped to 40.0 hours from 40.1 hours while average weekly overtime hours edged up to 2.8. The average workweek in the private service sector fell to 33.0 hours from 33.2 hours. The aggregate weekly hours index in the private sector, a key indicator of production and income, fell 02% last month (+0.9% y/y) after a 0.1% December easing.

In the household survey, the decline in the jobless rate to 4.0% from 4.1% occurred as the rate for teenagers rose to 11.6%, while for individuals aged 20-24 the rate eased to 6.6%. The jobless rate for workers aged 25-54 slipped to 3.4% but for workers 55 and over, it was little changed at 3.1%.

The employment/population ratio for all workers rose to 60.1% in January. It remained below its high of 61.1% in February 2020, just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.