Payrolls Jump 200K, Beating Expectations As Earnings Soar Most Since 2009

While Wall Street did expect a whisper number above the consensus forecast of 180K, the big question for today's payrolls report was what would average hourly earnings - that critical leading indicator for inflation - do. Well, according to the BLS, while January payrolls did indeed beat, rising by 200K, above consensus...

... it was the average hourly earnings that slammed expectations, rising by 2.9% Y/Y (and up 0.3% M/M, exp. 0.2%) well above the 2.6% expected, and the highest print since Jun 2009.

However, it important to note that the only reason hourly earnings rose as much as they did is because the average weekly hours worked dropped sharply from 34.5 to 34.3. Meanwhile the average weekly earnings actually declined from 2.9% to 2.6%, with the number dropping from $919.43 in December to $917.18.

Elsewhere, the unemployment rate kept constant at 4.1%, as expected.

Going back to payrolls, the change in total nonfarm payroll employment for November was revised down from +252,000 to +216,000, and the change for December was revised up from +148,000 to +160,000. With these revisions, employment gains in November and December combined were 24,000 less than previously reported.  After revisions, job gains have averaged 192,000 over the last 3 months.

In kneejerk response, Bill Gross just said that the jobs report "should send the 10Y yield to 3%", and the report ensures the "Fed will continues to hike."

Summarizing the report's key details:

  • U.S. Jan. Nonfarm Payrolls Rose 200k;
  • Avg. hourly earnings Y/y 2.9%, prior 2.7% est. 2.6%
  • U.S. Nonfarm private payrolls rose 196k vs prior 166k; est. 181k
  • Manufacturing payrolls rose 15k after rising 21k in the prior month; economists estimated 20k, range 10k to 30k from 19 economists surveyed
  • Unemployment Rate at 4.1%
  • Unemployment rate 4.1% vs prior 4.1%; est. 4.1%
  • Participation rate 62.7% vs prior 62.7%
  • Avg. hourly earnings 0.3% m/m, est. 0.2%, prior 0.4%
  • Underemployment rate 8.2% vs prior 8.1%
  • Change in household employment 409k vs prior 104k

Some additional details:

Total nonfarm payroll employment rose by 200,000 in January. Employment continued to trend up in construction, food services and drinking places, health care, and manufacturing.

Construction added 36,000 jobs in January, with most of the increase occurring among specialty trade contractors (+26,000). Employment in residential building construction continued to trend up over the month (+5,000). Over the year, construction employment has increased by 226,000.

Employment in food services and drinking places continued to trend up in January (+31,000). The industry has added 255,000 jobs over the past 12 months.

Employment in health care continued to trend up in January (+21,000), with a gain of 13,000 in hospitals. In 2017, health care added an average of 24,000 jobs per month.

In January, employment in manufacturing remained on an upward trend (+15,000). Durable goods industries added 18,000 jobs. Manufacturing has added 186,000 jobs over the past 12 months.

Employment in other major industries, including mining, wholesale trade, retail trade, transportation and warehousing, information, financial activities, professional and business services, and government, changed little over the month.

The average workweek for all employees on private nonfarm payrolls declined by 0.2 hour to 34.3 hours in January. In manufacturing, the workweek declined by 0.2 hour to 40.6 hours, while overtime remained at 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down by 0.1 hour to 33.6
hours. (See tables B-2 and B-7.)