Larger Payroll Gains Signal U.S. Job Market Healing: Economy
January’s increase in employment and revisions showing even bigger gains in prior months point to a healing in the U.S. job market that will help consumers better cope with a higher payroll tax.
Employers added 157,000 workers following a revised 196,000 advance the prior month and a 247,000 surge in November, Labor Department figures showed today in Washington. Revisions added a total of 127,000 jobs to the count in the last two months of 2012. A separate survey of households showed the unemployment rate unexpectedly rose to 7.9 percent from 7.8 percent.
The pickup in hiring brightened the outlook for consumer spending, the biggest part of the economy, sending the Dow Jones Industrial Average above 14,000 for the first time since 2007. At the same time, rising joblessness means Federal Reserve officials, who say they’ll wait until unemployment falls to 6.5 percent to raise the benchmark interest rate, are likely to keep pumping money into financial markets.
The report is “an encouraging sign for the U.S. economy,” Federal Reserve Bank of St. Louis President James Bullard said in an interview in Washington. Payroll growth averaging about 200,000 jobs over the past three months has been “impressive” and supports his forecast that economic growth will accelerate to about 3 percent this year, he said.
Other reports today showed manufacturing grew in January at the fastest pace in nine months and spending on construction projects climbed more than forecast in December.
The Dow climbed 1.1 percent to 14,009.79 at the close in New York. The yield on the benchmark 10-year Treasury note rose to 2.03 percent from 1.99 percent late yesterday.
Elsewhere, manufacturing in China, the world’s second- biggest economy, expanded in January for a fourth consecutive month, indicating global growth picked up at the start of 2013.
The median forecast of 90 economists surveyed by Bloomberg projected payrolls would rise 165,000 in January. Projections ranged from gains of 115,000 to 230,000 following an initially reported 155,000 increase in December.
The Labor Department today also issued its annual benchmark update, which aligned employment data spanning April 2011 to March 2012 with corporate tax records. The revision showed payrolls grew by an additional 424,000 workers, on an unadjusted basis, in that period.
Combined with the updates for November and December, the revisions put payroll employment at the end of 2012 at 134.7 million workers, 647,000 higher than previously estimated.
“The big story is all the upward revisions to the previous months, which gives the report a real positive spin,” said Harm Bandholz, chief U.S. economist at UniCredit Group in New York, who forecast a 160,000 gain in payrolls. “All these concerns that the fiscal uncertainty deterred businesses from hiring, they certainly haven’t materialized.”
The job gains at the end of last year also help underscore that the economy wasn’t as weak as figures on gross domestic product indicated. GDP unexpectedly declined at a 0.1 percent annual rate in the fourth quarter, the worst performance since the end of the recession in 2009.
The U.S. has recovered 5.51 million of the 8.74 million jobs that were lost as a result of the last recession.
The unemployment rate was forecast to hold at 7.8 percent, according to the Bloomberg survey median. Estimates ranged from 7.6 percent to 7.9 percent.
The increase in unemployment gives bond yields room to decline after the Treasury market’s worst start to a year since 2009, Bill Gross, manager of the world’s biggest bond-fund, said today. The jobless rate signals the Fed may maintain its easing stance for some time, he said.
“We see today’s number at 7.9 percent, and we say ‘hey, it’s still all clear,’ they will still be writing checks and probably continue for a while,” Pacific Investment Management Co. founder Gross said in a radio interview on “Bloomberg Surveillance” with Tom Keene.
In addition to continuing increases among health-care providers, employment gains last month were led by retailers and construction companies, where a 28,000 January increase capped the strongest three-month gain for builders since April 2006.
Spending on U.S. construction projects climbed 0.9 percent in December to an $885 billion annual rate, the highest level since August 2009, according to figures today from the Commerce Department.
Construction outlays climbed 9.2 percent for all of 2012, the first annual increase since 2006 and the biggest since 2005, today’s report showed.
Among companies hiring is Lowe’s Cos. (LOW), the second-largest U.S. home-improvement retailer, which has benefited from a recovery in the housing market. The Mooresville, North Carolina- based company said Jan. 22 it will take on 45,000 seasonal workers, 13 percent more than a year earlier, and add 9,000 permanent employees.
Today’s jobs report showed factories added 4,000 workers in January, compared with a projected 10,000 advance and following an 8,000 increase in the previous month.
Fortunes may change in coming months as global growth picks up and business investment improves.
The Institute for Supply Management’s manufacturing index climbed to 53.1 in January, the highest level since April, from 50.2 the prior month, the Tempe, Arizona-based group’s report showed today. Readings above 50 signal expansion. The figure exceeded the highest estimate in a Bloomberg survey of 86 economists.
The employment report also contained hopeful signs for the long-term unemployed. The average duration of unemployment fell by almost three weeks in January to 35.3, the lowest since December 2010.
Ryan Tiffany, a 31-year-old who lost his finance job in August, felt better about quickly landing new employment as the economy showed signs of improving. He began work last month at Paramount Solar, where he is a solar-power sales specialist.
“I was more nervous about not finding the right fit,” Tiffany of Roseville, California, said about his job search, which he extended to make sure he found the right workplace environment. He said he now feels more financially secure, and he and his fiancé are saving up to buy a house.
Hourly earnings rose 0.2 percent for all workers on average last month to $23.78 from $23.74 in December, today’s report showed. They climbed 2.1 percent from January 2012, matching the December increase as the biggest since March.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- held at 14.4 percent.
The Obama administration took the jobs report as an opportunity to advocate against steep budget cuts.
“What we see is a job market that’s healing, but it’s not back to full health,” Alan B. Krueger, chairman of the White House Council of Economic Advisers, said today during an interview on Bloomberg Television. “It’s extremely important that we continue to build on this recovery.”
Congress must “act to avoid self-inflicted wounds to the economy” as it struggles to avert $85 billion in across-the- board cuts scheduled to take effect on March 1, Krueger said in an e-mailed statement.
Lawmakers on Jan. 1 allowed the payroll tax that funds Social Security benefits to revert to 6.2 percent from 4.2 percent and boosted the levy on top income earners. Congress is now debating how to approach the automatic spending reductions that would further crimp growth.
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