Job Growth Got Off To A Slower Start in January

Feb 5, 2014

Change-in-Nonfarm-Private-Employment-January-2014Snowy cold weather and a dose of post-holiday caution kept hiring softer in January than many economists were expecting. HR services company ADP and Moody Analytics reported this morning that 175,000 private sector jobs were created last month, 10,000 to 14,000 fewer than the average of analyst predictions.

The report sent stocks lower this morning, although other economic reports suggested there is more strength in the economy than this week’s deep drop in financial markets might suggest. The Institute for Supply Management, which helped set off Monday’s market decline with a weaker than expected manufacturing report, this morning reported  its services index rose to 54 last month from 53 in December. The ISM’s services employment index was also up.

The ADP report and ISM’s service sector improvement moderated investor fears, as economists and money managers blamed the brutal January weather for much of the economic anemia.

“While conditions improved for the survey week (when the government counts jobs and employment), the rest of the month was quite cold,” Michelle Meyer, an economist Bank of America Merrill Lynch told Reuters before this morning’s reports were out. “In some sectors such as construction, builders may be hesitant to start new projects given harsh weather conditions, creating delays in the supply chain.”

The U.S. Department of Labor issues its monthly employment report Friday morning. Surveys of economists’ forecasts estimates the report will put January’s new job growth at 185,000 (Reuters), 188,000 (Bloomberg) and 189,000 (Dow Jones). Most surveys also expect the report will revise up the 74,000 job growth number from December. An annual numbers adjustment will increase the total jobs count for all of 2013 by about 345,000.

Business research group, The Conference Board, said its count of online job postings in January was down 56,800 from December. However, there were 5 million different jobs online during the month. There were three times as many jobs in “the higher-wage professional categories like computer workers and professional medical workers advertised as unemployed professionals,” The Conference Board observed. The situation was the reverse in the lower paid service and production categories.

These numbers are all important because they are relied on by CEOs and CFOs in making decisions about whether to hire and by how much. The Federal Reserve also monitors the job numbers to help guide its bond buying policy. Last month, the Fed began reducing its bond buying, relying on a fairly strong set of indicators — including job growth — over the summer and fall. However, if January’s employment statistics from the Labor Department are weak, it could make a difference in how fast the Fed moves on its bond buying tapering.

In the ADP National Employment Report, Mark Zandi, chief economist of Moody’s Analytics, said, “Cold and stormy winter weather continued to weigh on the job numbers. Underlying job growth, abstracting from the weather, remains sturdy. Gains are broad based across industries and company sizes, the biggest exception being manufacturing, which shed jobs, but that is not expected to continue.”

The report said companies of all sizes added workers in January, with the smallest business — employers with fewer than 50 workers — adding 75,000 of the 175,000 total. Employers with more than 1,000 workers grew their payrolls by 31,000.

ADP’s job growth by sector showed:

  • Construction 25,000
  • Manufacturing -12,000
  • Trade/transportation/utilities 30,000
  • Financial activities 0
  • Professional/business services 49,000

SHRM’s LINE report for January predicted that manufacturing hiring would decline, while hiring in the service sector would be up strongly. The report for February will be released tomorrow morning.