Modest slowdown in US job growth expected in January
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[February 02, 2024] By
Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth likely slowed marginally in
January as a resilient economy and strong worker productivity encouraged
most businesses to retain their employees, a trend that could see the
economic expansion sustained this year.
The closely watched employment report from the Labor Department on
Friday could further diminish financial market expectations of an
interest rate cut in March, with annual wage growth forecast to have
maintained its solid pace last month.
The Federal Reserve left interest rates unchanged on Wednesday. Fed
Chair Jerome Powell offered a sweeping endorsement of the economy's
strength, telling reporters that interest rates had peaked and would
move lower in coming months.
Most economists were dismissive of recent high-profile layoffs including
12,000 job cuts announced by United Parcel Service this week, arguing
that the focus should be on worker productivity, which has exceeded a 3%
annualized growth pace for three straight quarters and cooling labor
costs.
"There are increasing reports of some layoffs, but I don't see that
there's any significant change in terms of the overall momentum of the
economy," said Brian Bethune, an economics professor at Boston College.
"If workers are productive, why wouldn't you want to hire?"
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The survey of establishments is likely to show nonfarm payrolls
increased by 180,000 jobs last month after rising 216,000 in December,
according to a Reuters poll of economists.
Estimates ranged from 120,000 to 290,000. The employment gains would be
below the monthly average of 225,000 jobs in 2023, but well above the
roughly 100,000 per month needed to keep up with growth in the working
age population.
Economists estimated that layoffs in January, a spillover from the end
of the year, were below normal. That would boost the job count number
after accounting for seasonal fluctuations and would also offset the
drag from winter storms that slammed large swaths of the country in
mid-January. The snowstorms could, however, shorten the average
workweek.
Employers are generally wary of sending workers home following
difficulties finding labor during and after the COVID-19 pandemic. But
some companies, which enjoyed a boom in business during the pandemic,
are laying off workers as conditions return to normal.
"While businesses are starting to moderate the size of their workforce
by either reducing temporary hires or reducing the number of hours that
their workers they have on staff work a week, they haven't yet moved to
lay off workers," said Beth Ann Bovino, chief economist at U.S. Bank in
New York.
"That's because, well given 2022, businesses realize that holding onto
workers for the possibility of a run-up in demand as we saw last year,
could come in handy."
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![](../images/020224PIX/busine58.jpg)
A "Help Wanted" sign hangs in a restaurant window in Medford,
Massachusetts, U.S., January 25, 2023. REUTERS/Brian Snyder/File
Photo
![](http://archives.lincolndailynews.com/2017/Jul/22/images/ads/current/rohlfs_lda_072017.png)
BROAD GAINS ANTICIPATED
Job growth last month was likely across the private and public
sectors. Economists will be eager to see job growth continuing to
broaden after being concentrated for several months in 2023 in less
than a handful of sectors, including government, leisure and
hospitality, as well as healthcare.
With January's employment report, the government will publish its
annual "benchmark" revisions and update the formulas it uses to
smooth the data for regular seasonal fluctuations in the
establishment survey.
The government last year estimated the economy created 306,000 fewer
jobs in the 12 months through March 2023 than previously reported.
Payrolls data from April through December could also be revised. The
benchmark revisions will also affect average hourly earnings and the
workweek.
Average hourly earnings are forecast to have increased 0.3% in
January after rising 0.4% in December. That would leave the annual
increase in wages unchanged at 4.1% in January.
Annual wage growth would remain well above its pre-pandemic average
and the 3.0% to 3.5% range that most policymakers view as consistent
with the Fed's 2% inflation target. But some economists are not
worried.
"Markedly high productivity growth means the Fed should not be
overly concerned about still strong wage growth dynamics," said
Oscar Munoz, chief U.S. macro strategist at TD Securities in New
York.
Financial markets have dialed back their expectations of a rate cut
in March and now expect the U.S. central bank to start lowering
borrowing costs in May, according to CME Group's FedWatch Tool.
Since March 2022, the Fed has raised its policy rate by 525 basis
points to the current 5.25% to 5.50% range.
New population estimates will also be incorporated into the
household survey, from which the unemployment rate is derived.
January's unemployment rate and other measures from the household
survey will not be directly comparable to December.
![](http://archives.lincolndailynews.com/2024/Feb/02/images/ads/current/businessdirectory_dailycover_2023.png)
The unemployment rate is forecast rising to 3.8% from 3.7% in
December. It has risen from more than a five-decade low of 3.4% last
April. Flows into the labor force as well as household employment
will watched after large declines in December.
(Reporting by Lucia Mutikani; editing by Jonathan Oatis)
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