Economy Adds 304,000 Jobs in January, Employment Rate Hits New High for Recovery

February 01, 2019

February 1, 2019 (Jobs Byte)

By Dean Baker

Manufacturing wages have badly lagged the rest of the labor market, rising just 1.4 percent.

The Bureau of Labor Statistics (BLS) reported the economy added 304,000 jobs in January. However, this was accompanied by a downward revision in reported job growth for the prior two months of 70,000. This puts average job growth over the last three months at 241,000.

The unemployment rate edged up to 4.0 percent. This may have been affected by the government shutdown, as many people who were furloughed reported being unemployed for the month. (The share of the unemployed who reported being on temporary layoffs rose from 12.1 percent to 14.6 percent.)

On the flip side, the employment-to-population ratio (EPOP) edged up to 60.7 percent, a new high for the recovery. The biggest factor here was a rise in the EPOP for prime-age men (ages 25 to 54) from 86.1 percent to 86.5 percent, a new high for the recovery. This is still 1.5 percentage points below the prerecession peak and 3.2 percentage points below the peak reached in 1999.

The EPOP for prime-age women also hit a new high for the recovery, edging up from 73.4 percent to 73.5 percent. This is 0.6 percentage points above its prerecession peak but still 1.4 percentage points below the peak hit in 2000.

Looking at unemployment by education, college grads continue to be the biggest losers, with a jump from 2.1 percent to 2.4 percent. This could be due to the shutdown, since federal employees are disproportionately college grads. Nonetheless, college grads are the only group not to see their unemployment rate fall below prerecession lows.

There was a jump of 490,000 to 5,147,000 in the number of people who reported working part-time for economic reasons. This is likely due to the shutdown. Interestingly, the number of people who voluntarily work part-time fell by 285,000 and is actually down slightly over the last year. One of the predicted effects of the Affordable Care Act (ACA) was that it would allow people to work part-time since they would no longer be dependent on their employer for health care.

On the establishment side, the job gains were widely spread across industries. Construction led the way with 52,000 jobs, a figure that might have been inflated by better than usual January weather in the first part of the month. Health care added 41,600 jobs after adding 48,900 last month. Both figures are well above the average of 30,700 over the last year. Restaurants added 36,600 jobs in January, up from an average of 23,500 over the last year.

Retail trade added 20,800 jobs, well above its average of 2,200 over the year. The information sector actually lost 4,000 jobs. Employment in the sector is up just 9,000, 0.3 percent over the last year. Manufacturing employment rose by 13,000 in January, the slowest growth since an increase of 8,000 jobs in August. There was also a small decline in the average workweek in manufacturing, leading to a 0.1 percent drop in the index of aggregate weekly hours.

Year-over-year wage growth was 3.2 percent, showing little evidence of acceleration. This is the same as the annualized rate of the last three months (November, December, January) compared with the prior three months (August, September, October). Still, if inflation remains near 2.0 percent, this will allow for modest real wage growth.

There are, however, sharp difference across sectors. Pay increases have been sharpest in the lowest-paying sectors, with retail wages up 4.9 percent and restaurant wages up 3.9 percent over the last year. Manufacturing, by contrast, has seen very weak wage growth, with the average hourly wage up just 1.4 percent over the last year.

While the country has been adding back manufacturing jobs at a modest pace over the last two years, the new jobs pay much less than existing ones and are less likely to be unionized. The country today has fewer unionized workers in manufacturing than at the trough of the recession in 2009, with the unionization rate dropping from 10.9 percent to 9.0 percent over the last nine years. This means that while we are seeing job growth in the sector, for the most part, better paying unionized jobs are being replaced with lower paying non-unionized jobs.

This is, again, a very positive report. The economy is adding jobs at a rapid pace. Workers are seeing modest real wage gains as a result of the tight labor market. There is little reason for concerns about accelerating inflation.

Support Cepr


If you value CEPR's work, support us by making a financial contribution.

Si valora el trabajo de CEPR, apóyenos haciendo una contribución financiera.

Donate Apóyanos

Keep up with our latest news