Job Gains From Factories to Stores Add Heft to U.S. Job Market Recovery
The U.S. labor market recovery is broadening as industries from construction to retail to manufacturing added workers in January and the jobless rate fell to the lowest level in three years.
The world’s largest economy generated 243,000 jobs last month following a 203,000 increase in December, Labor Department figures showed yesterday in Washington. The share of industries showing job gains climbed to the highest level since April.
Stocks advanced, extending the best start to a year for the Standard & Poor’s 500 Index since 1987, on optimism the economy will weather the European debt crisis. The data may help President Barack Obama’s re-election bid while casting doubt on the Federal Reserve’s plan to keep lending rates low at least through late 2014.
“There’s encouraging breadth in terms of what we are seeing in the labor market,” Bruce Kasman, chief economist at JPMorgan Chase & Co in New York, said in a conference call after the report. “We got good gains in both the goods-producing and service-producing industries,” he said. “We don’t think the Fed will need to deliver further quantitative easing during 2012,” he said, referring to large-scale asset purchases.
The Labor Department’s so-called employment diffusion index, which measures the share of industries adding jobs, climbed to 64.1 in January from 62.4 a month earlier. The gauge was last higher in April, when it was at 65.2. Prior to a surge in early 2011, the index was last above 61 in January 2007. Readings above 50 signal more industries are adding jobs than cutting them.
Manufacturing payrolls increased by 50,000, the most in a year, and service providers added 162,000 jobs, the biggest gain since September. Professional and business services hired 70,000 workers, the most since March. Employment in leisure and hospitality, education and health care also rose.
“It basically gives the recovery more legs if the hiring is broad-based,” said Ellen Zentner, a senior economist at Nomura Securities International Inc. in New York. “You want the improving economic picture to come from many industries.”
The unemployment rate fell to 8.3 percent in January from 8.5 percent.
The payroll report coincided with other stronger-than- forecast data this week. Service industries last month grew the most in a year, and the pace of manufacturing expansion was the strongest since June, according to the Tempe, Arizona-based Institute for Supply Management.
Car sales in January rose to a 14.1 million annual rate, the highest since the government’s “cash-for-clunkers” program in August 2009, industry data showed.
Excluding J.C. Penney Co. (JCP) and Walgreen Co., same store sales for the 20 companies tracked by Swampscott, Massachusetts- based Retail Metrics advanced 4 percent, beating estimates for a 3 percent gain.
The median projection in the Bloomberg survey called for payrolls to rise by 140,000. Revisions added a total of 60,000 jobs to payrolls in November and December.
Sustained increases of around 200,000 jobs a month are needed to bring the unemployment rate down one percentage point over a year, according to Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.
Obama used yesterday’s report to push lawmakers for an extension of the payroll-tax cut for workers and unemployment benefits.
“The recovery is speeding up,” Obama said at a fire station in Arlington, Virginia. “And we’ve got to do everything in our power to keep it going.”
Employment, overtime and hours worked in factories increased as manufacturers, who have been leading the two-year recovery, boosted production to rebuild inventories and meet global demand for their goods.
Assembly-line workers put in an average 41.9 hours of work each week, the most since 1998.
Tibco Software Inc. (TIBX) plans to hire 500 people in the U.S. this year as the economy improves and Europe works out its debt crisis, Vivek Ranadive, chief executive officer of the Palo Alto, California-based company said in an interview.
Construction companies added 21,000 workers last month. The number of people unable to go to work because of bad weather was 206,000 last month, less than half the 424,000 average for the month since 1976. The shortfall signals mild weather may have played a role in the gain in employment, according to Neil Dutta, an economist at Bank of America Corp. in New York.
Average hourly earnings rose 0.2 percent to $23.29, the report showed. The average work week for all workers held at 34.5 hours.
The Fed said on Jan. 25 that it would extend its low-rate pledge from a prior date of mid-2013. Bernanke, speaking at a news conference after the meeting, said that the option of a third round of large-scale bond purchases is still “on the table.”
“We still have a long way to go before the labor market can be said to be operating normally,” Bernanke told the House Budget Committee in Washington this week.
Yesterday’s figures may change the Fed’s thinking, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “The report definitely scales down the odds for QE3, particularly the drop in the unemployment rate,” Feroli said. “There is strength in the labor market.”
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