Very Strong January Employment

Popular Economics Weekly


Total nonfarm payroll employment increased by 304,000 in January, and the unemployment rate edged up to 4.0 percent, the Bureau of Labor Statistics reported today. Job gains occurred in several industries, including leisure and hospitality, construction, health care, and transportation and warehousing.

This is an unusually high jobs number for January, especially after the robust December payroll numbers, which were downgraded to 222,000 private payroll jobs from the original 312,000 jobs total.

The big mystery is with average hourly wages rising at 3.2 percent, there are still no signs of inflation. And that is keeping both short and long term interest rates extremely low. The 10-year Treasury yield has now sunk to 2.65 percent; very unusual for this late in a recovery cycle. It means mortgage rates for a 30-year conforming fixed rate are now 3.75 percent with a one point origination fee for the most credit-worthy borrowers, which is a rate last seen during the Fed’s Quantitative Easing cycles that pushed down long term rates to near post-WWII lows.

And it is keeping the Fed from raising short term rates further, as well, which is boosting consumers’ spending, who are fully-employed and flush with cash from the best wage and benefit increases in 11 years.

The Labor Department said the impact of the partial federal government shutdown contributed to the uptick in both the unemployment rate, at 4.0 percent, and the number of unemployed persons, at 6.5 million. Among the unemployed, the number who reported being on temporary layoff increased by 175,000. This figure includes furloughed federal employees who were classified as unemployed on temporary layoff under the definitions used in the household survey.

Companies that provide leisure and hospitality — hotels, restaurants, gambling, recreation — added 74,000 jobs in a surprisingly strong gain, reports the BLS. Construction firms took on 52,000 new workers, particularly in fields geared toward commercial building. Health-care providers hired 42,000 workers. Transportation and delivery companies beefed up payrolls by 27,000. And retailers increased staffing by 21,000.

Why such low inflation and interest rate numbers? Macro-economists are saying there is a huge amount of liquid assets sloshing around the world from extremely high savings rates by individuals and central banks. Central banks have not really begun to tighten their purse strings, even 10 years into the recovery from the Great Recession. The EU is worried about slowing economic growth, for one, while China is also showing signs of lower growth.

So the American Fed cannot afford to be in a crediting tightening mode either, which would put a damper on U.S. growth. Multi-national U.S. corporations aren’t repatriating much of the $2.4 trillion in overseas profits, either, which means most of their profits aren’t being put to work to improve either American productivity or future growth.

In fact, even the 2017 Republicans’ Tax Cut and Jobs Act hasn’t helped, as I said yesterday, which MarketWatch’s Howard Gold has labeled the “Shareholder and CEO Enrichment Act of 2017.”

The bottom line seems to be the U.S. is back in the goldilocks growth mode; growth is neither too hot (because of low inflation), nor too cold (with full employment), which is a conundrum of sorts, as former Fed Chair Alan Greenspan was wont to say. It doesn’t fit some economic models, in other words.

But many major economists—such as Harvard economist Larry Summers, IMF’s Olivier Blanchard, Nobelists Paul Krugman and Joe Stiglitz—believe it’s a perfect time to put some of that excess cash to better use than boosting stockholder and CEO incomes. Why not use it to begin to build for future growth in all the sectors that would secure a better future—education, infrastructure, R&D, healthcare? All that’s lacking is the political will.

Harlan Green © 2019

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About populareconomicsblog

Harlan Green is editor/publisher of, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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