Economic Blog

U.S. hiring came in stronger than expected in January, rebounding from a disappointing December print.

Nonfarm payrolls rose by 225,000 in January, far surpassing Bloomberg’s consensus estimates for a 165,000 gain, according to the jobs report released today by the U.S. Bureau of Labor Statistics. This number may help alleviate some investor unease over December’s somewhat weak reading. We argued at the time that December’s reading likely was due in large part to calendar effects and the volatility of month-to-month changes. We prefer to base our views of the labor market’s vitality on the larger trend, which, has been undeniably strong, as shown in the LPL Chart of the Day.

Some investors have questioned how long hiring can remain elevated before we experience a worker shortage or a sharp rise in wages. The answer, according to this report, is not yet.

In addition to the strong hiring numbers, workers also have enjoyed healthy wage gains. January saw average hourly earnings rise 3.1% year over year, a slight pickup from December, while average hours worked remained unchanged. “Today’s wage number exceeds inflation, meaning workers are growing their purchasing power in real terms and should be able to continue increasing their consumption of goods and services,” said LPL Financial Chief Investment Strategist John Lynch. “But the number is also lower than the 4% threshold that has historically signaled an overheating job market and potential for subsequent economic and market volatility. This is a very encouraging report.”

The one slight blip in today’s release showed the unemployment rate inching 0.1% higher to 3.6%. This was mainly due to changes to the size of the labor force, which affected revisions. Still, given the extremely low unemployment level, the volatility of month-to-month numbers, and the overwhelmingly positive tone of the other data points released today, we feel confident about the prospects for the U.S. consumer to continue powering this economic expansion through 2020 and beyond.

For more of our investment insights, check out our Outlook 2020: Bringing Markets Into Focus.

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