The Bureau of Labor Statistics’ (BLS) report on the nation’s jobs growth raised alarm bells for some, given the slower than expected pace. The BLS reported that the pace of jobs growth slowed from 262,000 in December to 151,000 in January. Before hitting the panic button, consider this:
Although the pace of jobs growth slowed by 111,000 compared to December, 99,000 of the 111,000 slowdown in jobs growth occurred in two industry sectors: Professional & Business Services slowed by 51,000 while Education & Health Services slowed by 48,000. Digging a little deeper, virtually all of the slowdown in Professional & Business services came from a 50,000 slowdown in part-time help. What is curious is that part-time help added 25,000 jobs in December and then lost 25,000 jobs in January for a change of (50,000). The part-time jobs were not in retail trade, they were in the professional and business services trade. Given the pattern from December to January, this appears to be a seasonal event that was not captured by the seasonal adjustment factors.
The report clearly showed the continuing negative effects to the energy sector from falling oil prices. The mining and logging sector-energy jobs are in this sector-fell by 7,000 jobs. This continues the string of jobs losses for this sector that occurred throughout 2015. Interestingly, manufacturing showed a gain of 29,000 jobs. This is the third consecutive month of jobs gains for this sector. Although manufacturing has been hurt by weaker exports-due to a strong dollar-overall, the sector is still adding jobs. Domestic auto sales have clearly helped this industry sector as the motor vehicle and parts sector of manufacturing added 3,500 jobs.
So, it is not clear if the slowdown in jobs creation was a one time anomaly due to seasonal factors or the start of a new trend. Keep in mind that the recovery is entering its seventh year. Historically, it would not be surprising to see jobs creation slow as the recovery matures. Also, keep in mind that business surveys are showing evidence of labor shortages. Both large and small businesses are reporting difficulty in filling open positions due to a lack of qualified help.
One month does not make a trend, so this will bear watching over the next couple of months. Clearly, this is something that the Federal Reserve will be closely watching. For now, the Federal Reserve should remain in a “watch and see” mode until more economic data is gathered.
On a separate note, for those interested in the Spokane economy, I participated in an interview on Spokane Talks Online. The interview is about 25 minutes long and can be heard as a podcast at the following link:
Steve Scranton is the Chief Investment Officer and Economist for Washington Trust Bank and is a CFA charter holder with over 30 years of investment experience with equities, tax-exempt and taxable fixed income securities. Steve actively participates on committees within the bank to help design strategies and policies related to client and bank owned investments. Steve also serves as the economist for the Bank and has been a featured speaker for both client and professional organization events throughout the Northwest.