The first major indicator of how the economy is performing in 2013 is due out Friday morning, and it will offer a window onto whether the job market is gaining momentum or stumbling in the new year.
Analysts are expecting the new Labor Department report, due out at 8:30 a.m., to show continuity. Forecasters expect to see 165,000 net new jobs added in January, up a bit from the 155,000 added in December. They expect the unemployment rate to be unchanged at 7.8 percent. Here are a few things to watch for in the details of the report.
Details of the household survey. The December report was generally solid, particularly in terms of what employers reported on the hiring and wage front. But the survey of households used to calculate the unemployment rate showed some weakness. While the overall unemployment rate was unchanged, the number of people reporting having jobs rose by a meager 28,000, and more people reported being unemployed. The ratio of employed people to the population ticked down a tenth of a percent to 58.6 percent. If the job market gained momentum to start 2013, one would hope to see those trends reverse.
Construction jobs, please! The housing sector is in a full-fledged rebound, with residential investment rising at a 15 percent annual rate in the fourth quarter. But it hasn’t translated thus far into large numbers of construction jobs. The sector lost 10,000 jobs in November and added 30,000 in December, and the question now is whether it will start to pick up on a scale commensurate with the gains in building activity.
Falling long-term unemployment. A welcome trend the last couple of months is a decline in the number of people who report having been unemployed for more than 27 weeks, or about six months. It fell by 233,000 in November and another 18,000 in December. While part of this decline is surely due to people leaving the labor force entirely rather than finding jobs, it could signal that at least some of those who have had the worst go of things are starting to find opportunities.
What about government? Government employment has been a drag on the job-growth numbers for most of the last three years, first as state and local governments slashed jobs and, increasingly, as the federal government tightens its belt. Government employment fell by 66,000 in October, 10,000 in November and 13,000 in December. Watch for what it does next.
Did the fiscal cliff matter? First, there were the hard-fought December negotiations over the fiscal cliff, which, at least according to initial evidence, didn’t cause any meaningful slowdown in hiring, investment or retail sales that month. Then in January, the fiscal cliff deal that was enacted ended a payroll tax holiday, resulting in lower after-tax paychecks and higher taxes on high-income households. Perhaps counteracting those negative forces, the resolution of the deal may have removed a shroud of uncertainty around the economy.
Even if there is an eventual economic impact from those events, it is unlikely to show up in the January jobs numbers; pay more attention to January retail sales data due out on Feb. 13. But the numbers out Friday morning will give evidence of something different: how strong the underlying pace of U.S. job growth was before those forces came to bear.