Job growth accelerated in January as total non-farm payroll employment increased by 304,000 – far better than analysts’ projections – and the unemployment rate edged up to 4.0%, according to the U.S. Bureau of Labor Statistics.
Significant job gains were reported in leisure and hospitality, construction, health care and transportation and warehousing. In addition, average hourly wages rose by three cents to $27.56, following a 10-cent gain in December.
Year-over-year, average hourly earnings have increased by .85 cents, or 3.2%.
The increase in the unemployment rate was in part due to the partial government shutdown, according to the BLS.
Among the unemployed, the number who reported being on temporary layoff increased by 175,000, according to the report. This figure includes furloughed federal employees.
The number of long-term unemployed – those jobless for 27 weeks or more – was little changed at 1.3 million. They accounted for 19.3% of the unemployed.
The labor force participation rate, at 63.2%, and the employment-population ratio, at 60.7%, were also little changed compared with the previous month.
Mark Fleming, chief economist at First American, says despite the slight impact from the government shutdown on the unemployment rate, the jobs report is overall positive and bodes well for the spring home shopping season.
“While financial markets remain volatile, the real economy and labor market continue to remain strong, which should benefit housing,” Fleming says in a statement. “Total non-farm payroll employment increased for the 100th consecutive month in January and wage growth remained strong at 3.2 percent compared with a year ago.”
It also appears that mortgage rates will remain stable moving into the spring home buying season.
“The monthly average for the 30-year, fixed-rate mortgage decreased from 4.64 percent in December to 4.44 percent in January,” Fleming says. “A January decline in long-term Treasury bond yields caused the mortgage rate decline and, combined with January wage growth, increased consumer house-buying power.”
Fleming adds that the “volatility in financial markets in January, primarily based on concerns about a global economic slowdown, tariff talks and domestic monetary policy tightening, has benefitted the housing market as it has inspired some opportunistic home buyers into action before the start of the busy spring home buying season.”
Doug Duncan, chief economist for Fannie Mae, says the January report “confirms that labor market conditions remain strong.”
“In spite of downside risk from the partial government shutdown, the payroll survey indicated that the economy added 304,000 jobs, the 100th consecutive monthly increase,” Duncan says. “Moreover, the labor force participation rate ticked up to 63.2 percent, its highest rate since September 2013, as the labor force participation rate for prime age workers rose to 82.6 percent, its highest rate since April 2010.
Duncan adds that “while earnings growth remains strong, broader inflation pressures appear to be contained.”
“Amid muted inflation and recent global economic and financial developments, the Fed’s tone has become more dovish, having recently communicated that it will be patient as it determines future adjustments to its key policy rate,” Duncan says in a statement. “In the context of growing risks to the economy, today’s jobs release supports our call that the Fed will raise the target range of the federal funds rate once more, in June, before pausing.
“Meanwhile, residential construction recorded strong employment growth, adding the most jobs since February 2018,” he adds. “The additional jobs suggest that positive housing construction activity will continue, helping to alleviate the for-sale housing shortage. A recent release of Fannie Mae’s Mortgage Lender Sentiment Survey cited the lack of inventory as a key reason behind tepid home sales last year.”