225K New Jobs Drive Big Opportunity for Businesses
The U.S. Labor Market added 225,000 jobs last month, higher than the average monthly job gains for last year. At this time, both trade negotiations and the political environment have not deterred hiring decisions or consumer sentiment.
The U.S. economy remains steady, and the job market remains strong.
- Unemployment rate remains low at 3.6 percent
- 183,000 new workers entered the labor force
- Healthy labor force participation at 63.4 percent, which is the highest since mid-2013
- Jobless claims drop to 202,000, a nine-month low
- Labor productivity in 2019 increased to 1.7 percent, hitting its highest level since 2010
- Wage growth remains steady at 3.1 percent
Why It Matters
With a continued low unemployment rate and strong job growth, employers are challenged to find the talent they need. The U.S. labor market could still see growth if workers can be attracted into the workforce.
Consumer sentiment in the U.S. remains high due to the high-performing labor market. As companies implement annual growth plans, LaborIQ’s forecast expects the skilled talent supply shortage to continue.
As a result, companies can:
- Focus on engagement initiatives, including non-compensation programs to support retention.
- Offer competitive wages, particularly in the professional and technical sectors to win talent.
- Invest in reskilling initiatives to combat skills shortages and prevent attrition for employees seeking skill enhancement.
The change in total nonfarm payroll employment for November and December combined was revised up by 7,000 jobs, resulting in average job gain of 204,000 for the final two months of 2019. Over the last two months of 2019 and first month of 2020, overall job gain is increasing relative to 2019.
Labor force participation rate increased to 63.4 percent in January 2020, which is the highest since mid-2013.
The unemployment rate rose slightly to 3.6 percent in January 2020.
Wage growth has been strongest in non-supervisory and blue-collar jobs, as well as the service-providing sector.
Construction led new job creation with a gain of 44,000, indicating a healthy residential housing market.
January Consumer Sentiment Index numbers rose to 99.5, the highest since August 2019.
Manufacturing expanded in January 2020, as the PMI® registered 50.9, an increase of 3.1 percentage points from the seasonally adjusted December reading of 47.8.
The Employment Cost Index continues to lag behind wage growth, indicating businesses are not making up wage variances with strong benefits packages.
GDP for Q4 2019 (advanced estimate) rose 2.1 percent, but full-year 2019 posted its slowest growth in three years at 2.3 percent.
A global slowdown remains a downside risk to the labor market. Fiscal policy, geopolitical tensions and tariff conversations have caused concern for businesses, although USMCA and the first round of U.S.-China trade talks reached a positive conclusion.
Education and Health Care Services make up 16.1 percent of total employment. Gain within this industry was 72,000 jobs this month. In the past 12 months, this industry has produced more than 630,000 jobs.
Construction makes up 5.0 percent of total employment. Gain within this industry was 44,000 jobs this month. In the past 12 months, this industry has produced more than 142,000 jobs. Mild January weather plus healthy residential markets (single-family and multi-family) are contributing to the growth. For single-family, mortgage originations are also increasing, impacting other consumer-driven markets, including banking and finance, electronics and furniture.
Leisure and Hospitality makes up 11.0 percent of total employment. Gain within this industry was 36,000 jobs this month. In the past 12 months, this industry has produced more than 320,000 jobs. Mild January weather and sports events in January contributed to job gain and growth.
Trade, Transportation and Utilities makes up 18.3 percent of total employment. Gain within this industry was 27,000 jobs this month. In the past 12 months, this industry has produced more than 137,000 jobs. With air travel being impacted by the coronavirus, transportation hubs, including Los Angeles, Atlanta, New York, Dallas-Fort Worth, Boston, Orlando and Washington, D.C, could be impacted.
Professional and Business Services make up 14.1 percent of total employment. Gain within this industry was 21,000 jobs. In the past 12 months, this industry has produced more than 390,000 jobs. Lack of skilled labor in Professional and Technical service jobs may reach critical levels this year unless more people participate in the labor force.
Financial Activities make up 5.8 percent of total employment. Loss within this industry was -1,000 jobs. In the past 12 months, this industry has produced more than 132,000 jobs.
Manufacturing makes up 8.4 percent of total employment. Loss within this industry was -12,000 jobs this month. In the past 12 months, this industry has produced approximately 26,000 jobs. Signing of the USMCA should favorably impact auto manufacturing jobs. Although PMI® shows positive signs due to US-China trade conversations and USMCA, the halting of the 737 MAX jetliner and coronavirus (especially for electronics production) will have an impact.
Average annual wage growth will hit 3.3 percent for the year, with two of the largest sectors, Professional and Business Services and Information, growing at 3.2 and 3.5 percent, respectively.
International trade and unexpected geopolitical volatility, including Middle East conflicts and the coronavirus, will be a big driver of consumer and business confidence.
Businesses should be leery of political rhetoric about the economy during the 2020 campaign season, paying attention instead to accepted indicators.
There is no expectation of an interest rate hike in 2020. But if job growth begins to slow, up to two interest rate cuts are expected, as decisions to hike rates are data-driven at this point.
Average annual job growth in 2020 may decelerate from 1.6 percent in 2019 to 1.2 percent due to a shortage of skilled labor. Historically low unemployment rates will force the U.S. economy into a skilled-labor shortage if those not in the labor force remain on the sidelines in the short run. This could create a hurdle to higher nominal job gain despite healthy U.S. economic fundamentals this year.
Jobs in Healthcare and Social Assistance are forecasted to lead at 2.4 percent followed by Professional and Business Services and Construction at 2.1 percent. Professional and Business Services jobs will be driven by the Technical Sector, whereas Construction job growth will be supported by a healthy residential housing market.
GDP is forecasted to slow to 1.9 percent in 2020, down from 2.3 percent in 2019.
Long-term job growth is expected to slow significantly starting in late 2020 and will bottom out during the 3rd quarter of 2021.