The economy began the year with solid job creation, and the labor market was much stronger at the end of 2012 than previously thought, according to new data out Friday that indicated surprising momentum in 2013.
Employers added 157,000 jobs in January, the Labor Department said, which was right in line with analyst expectations. The brightest news, though, was that revised estimates showed much higher job creation at the end of last year than first reported. The nation added a whopping 247,000 jobs in November and 196,000 in December, a combined 127,000 jobs above earlier estimates.
The January unemployment rate ticked up to 7.9 percent, from 7.8 percent, however, as both the number of people reporting having a job and the number looking for one edged up.
“There is certainly evidence of stronger job creation in the fourth quarter,” said Scott Anderson, chief economist of Bank of the West, in a research note. “But whether that trend tells us anything about the number of jobs that will be created in the first quarter is still an open question.”
Two separate reports also pointed to a growing U.S. economy in January. The Institute for Supply Management said its index of manufacturing activity spiked to 53.1, from 50.7. Numbers above 50 signal expansion, and the January reading was the highest since April. And the University of Michigan’s consumer sentiment survey showed a rise to 73.8 from 71.3, signaling greater confidence about the economy among the American public.
The news was enough to drive the stock market up; the Dow Jones industrial average briefly surpassed 14,000 for the first time since October 2007 just after 10 a.m. and again at about an hour later. At 11 a.m., the Dow was 14002.87, up 142 points, or 1.03 percent for the day.
The drivers of job growth in January were surprisingly consistent with the recent past. The construction sector added 28,000 jobs, following a 30,000 gain in December, suggesting that as more homes are going up, employers are expanding their construction crews. The retail sector added 33,000 jobs and apparently did pull back on hiring in anticipation of the increase in the payroll tax at the beginning of the year, siphoning money from consumers’ pockets. Two sectors that have been job creation stalwarts over the past three years–professional and business services and health care and education–kept up that steady performance, each adding 25,000 jobs.
Another consistent trend in January: Government employment fell by 9,000, which followed a 9,000 job loss in November and 6,000 job loss in December.
“It’s like we’re in Bill Murray’s ‘Groundhog Day,’” said Heidi Shierholz, an economist at the Economic Policy Institute. “Each month we wake up to the same report, with all the indicators – employment, unemployment, labor force participation, hours, wages – painting the same picture over and over.”
Private-sector employees worked the same number of hours in January, and hourly wages rose slightly. Overall, a wage index for all private-sector employees rose 0.4 percent in January, after an 0.5 percent rise in December.
Add it all up, and the economy seems to be holding up handily at the start of 2013, suggesting no major lingering effects from tense fiscal cliff negotiations at the end of December. But new tax increases for 2013 that worked into the fiscal cliff deal could still affect retail sales and other measures of economic performance in the months ahead.
Nothing about the new jobs numbers, then, should radically transform anyone’s assessment of how the U.S. economy is performing. Job creation is steady and strong enough to bring the unemployment rate down over time — just not very quickly. The January unemployment report was, more than anything, affirmation of that fact.