January Jobs Report? Highs, lows and in between

It looks as if January is one for the records with Friday's U.S. January JobsReport; yet despite the 304,000 gain (in non farm jobs), that raised the thermometer for many economists and job seekers, when only 180,000 were expected, wages continued to remain stubbornly low, and there was only a 3 cents raise, leading to an average wage for the American worker of $27.56.

The records are also showing that the last significant wage increase came when the Great Recession ended in 2009, a shock, perhaps to many; but, also a reality that does not take into account, an increased cost of living.

While the unemployment figure edged up from 3.9 percent to 4.0, due to the federal employee furlough, it also means, despite the fact those who need work are getting it, future employers will have a hard time finding workers.

That can also lead to the Fed boosting “rates by its June meeting, a development that could surprise some investors soothed by the central bank's cautious comments,” claimed one analyst at The Wall Street Journal.

"If employment growth remains this strong, there is still a fair chance of one more rate hike in the first half of this year," Andrew Hunter, senior U.S. economist at Capital Economics, says in a note.

“Both figures are a sign that the US economy remains strong despite recent stock market volatility over economic growth worries and a prolonged US trade war with China. The continued hiring boom also suggests that fears of a looming economic recession are largely overblown,” noted VOX.

“Most economists say the January jobs report indicates a strong overall U.S. labor market. With more Americans returning to work, consumer spending, which accounts for two-thirds of U.S. economic growth, will likely to continue on a steady pace, some analysts said.”

"I think muted wage growth is further indicative of the Fed’s current view on the economy," Robin Anderson, senior economist at Principal, said in a note. "There’s not a lot of inflation pressure right now, and I don’t think anything in this report will push the Fed toward another rate increase any time soon."

This all is leading to the law of unintended consequences as “Frustration over stagnant wages is also the major underlying factor behind widespread worker strikes across the country in places like California, Oklahoma, and West Virginia. Congressional Republicans had promised that their massive corporate tax cuts would help the average worker, but the gains have been meager,” and the Democrats will certainly be eager to exploit that in the march to the 2020 election.

Joy did reign on Pennsylvania Avenue, “There was a very, very positive vibe all around [in the White House],” Kevin Hassett, President Trump's chairman of the Council of Economic Advisers, said in an interview with Yahoo Finance. “I got, for the first time since I've been here, a knuckle bump from the President.”

“On the heels of a strong January this is another win for the bulls, and could help keep the momentum going,” said Mike Loewengart, VP of investment strategy for E-Trade Financial Corporation. “Fundamentals are standing strong—they haven’t seen their shadow just yet,” reported Yahoo Finance.

For Federal Reserve watchers, there seems to be a mixed record and The Wall Street Journal reported, More strong hiring could make the Fed change course. While Friday’s numbers boosted markets, some analysts fear that more steady economic data could force the Fed to reverse its stance again and raise interest rates. That could reignite worries that tighter financial conditions will slow economic growth,’ a cause of concern for many economists.”

They also exercised some caution, by stating that, “A Fed pause doesn’t preclude the U.S. economy from slipping further if global growth doesn’t reignite,” said Jim Vogel, head of interest-rate strategy at FTN Financial.

One problem investors face is the ramifications of tariffs and trade tensions have been largely absent as policy makers around the world have tilted toward a global economy.

“We haven’t talked about the effects of tightening tariffs on the global framework in three decades,” Mr. Vogel said, that leads to the impact of U.S. foreign trade policy outside of the domestic market.

On a positive note, “once again, the industry leaders include hospitality and health sectors, along with construction that edged up to 338,000,  an increase of 50,000, giving some relief to concerned workers.

“Workers with college degrees saw the biggest jump in unemployment last month, whereas workers without a high school education actually saw their unemployment rate fall slightly. This may partially reflect the effects of the shutdown, and the relatively high level of education in the federal workforce,” but also reflects what we have reported before that employers are looking outside the box, and with job growth showing the biggest gains in entry-level, or wage earning jobs, this is still a strong indicator.

More good news: “The unemployment rate climbed for workers of all race and gender groups last month, with an especially large jump for black men, who saw their unemployment rate climb from 5.8% in November to 7.1% in this report. (Once again, these figures were elevated due to the shutdown and may come back down in February.), in another note from the Journal.

Worth noting is that the biggest driver in employment were younger women entering the workforce, and going even further “The share of the population that is in the labor force, that is either working or looking for work, climbed slightly to 63.2%, the highest since 2013. The share of the population with a job also climbed slightly, reaching its highest mark since 2008,” and while not a huge figure it does give hope to another area of concern, aside from tepid wage growth, that has been on the worry list for most of 2018.

“Friday the Dow industrials ... [were] on track for their sixth consecutive weekly advance, which would mark the longest such streak since November 2017,” that took President Trump to praise it on Twitter.

On the whole, the indication of a strong economy gives support to many observers, politicians, and industry leaders, there is also the prediction is for only moderate growth for 2019, and to note again, “The tax-cut tailwinds are likely to fade, the state of the trade war remains uncertain and global growth is cooling. In addition, businesses say the shortage of skilled workers is limiting plans to expand their workforce.”