January jobs boomlet?

January 26, 2024

We are expecting a jump of 250,000 jobs in January with 225,000 of those gains in the private sector. That would be an acceleration over the 217,000 payroll gains we saw in December and mark the strongest month for private payrolls since May 2023.

The upside surprise would be due to the seasonal adjustment of the data. January is the largest layoff month of the year. Losses in sectors that hired up for the holidays, including retail, leisure and hospitality, transportation and warehousing tend to see the largest layoffs. In the 2010s, we lost 2.87 million jobs on average in January. However, retailers did not hire up as much as usual this year, while travel and tourism remained strong. That suggests we could see that more workers stayed in their jobs in January, which could boost the overall payroll data.

Indeed, last year January was the strongest month of the year for payrolls as only 2.5 million instead of 2.9 million were laid off during the month. That netted out to more than 400,000 new hires for the month.

Separately, hiring in health care and at the state and local levels is expected to remain strong. State and local governments are still flush with cash. A catchup in compensation gains over the summer and a slowdown in hiring elsewhere in the economy has enabled them to fill positions vacant since the onset of the recovery.

Average hourly earnings are expected to slow to 0.3% in January from 0.4% in December. We got an extra lift last month from the ratification of UAW contracts. A 0.3% gain during the month would keep average hourly earnings growing at a 4.1% rate from a year ago in January, the same as December. Many of the larger vehicle producers matched the gains negotiated by the UAW last month. It may be too soon to see if there are larger spillover effects of those wage gains. The UAW does not have the reach and power over other wage contracts that it once did. Indeed, the gain will only restore compensation to what it was in 2007, before adjusting for inflation once the new contracts expire in 2028.  

Separately, the unemployment rate is expected to hold at 3.7%, as participation in the labor force rebounds after a drop in December. We lost a lot of workers who existed in the labor market in December, notably women between the ages of 55 and 64. They are smack dab in the middle of people who are sandwiched between crisis care for grandchildren and elderly parents. Parental leave has also soared to new highs, with an expansion of it during the pandemic. Those out due to vacation is expected to remain elevated.

A series of bad storms, notably in the South, could show up as a rise in the number of workers unable to get to work due to weather. The rise in work from home and hybrid work is expected to mitigate those increases.

Finally, multiple job holders hit a record high in December and are expected to remain elevated in January.  In the 1990s boom, multiple job holders dropped as unemployment fell. The 2000s saw a major shift in multiple job holders, with them increasing as the unemployment rate fell. Part of that could reflect the increase in gig workers or a more fundamental shift, where employers are more willing to be flexible to enable workers to work more than one job. The latter would be a sad commentary on the economy and the stagnation that we saw in wages during much of the 2000s until recently.