With China’s viral outbreak disrupting trade and Boeing’s troubles weighing on American factories, the January U.S. jobs report on Friday may provide timely evidence of the U.S. economy’s enduring health.
Economists estimate that employers added 161,000 jobs last month and that the unemployment rate remained at a 50-year low of 3.5%, according to data provider FactSet. That pace of hiring would be weaker than the monthly average of the past two years yet still more than enough to reduce unemployment over time.
The closely watched jobs report comes in the same week that President Donald Trump boasted of his economic record in his State of the Union address, previewing a central campaign theme in his re-election bid.
Friday’s hiring figures may call into question some of the president’s triumphalism about the job market under his watch. Along with January’s hiring data, the Labor Department is expected to report that the United States had 500,000 fewer jobs in March 2019 than previously estimated. That would be a relatively small change in an economy with 150 million jobs. But it would still indicate that there was less hiring in the 12 months that ended in March, at a time of robust economic growth, than had been assumed.
“It takes a little bloom off the rose,” said Joe Brusuelas, an economist at RSM, a tax advisory and consulting firm.
The change stems from annual revisions the government makes after receiving a count of total jobs from tax records, which are released with a delay. Sharp revisions, like those expected on Friday, typically mean that the government didn’t precisely estimate how many new companies were started or how many went out of business.
Preliminary results released in August suggest that the revisions largely reflect ways in which the economy is evolving. For example, the revisions will likely reduce total retail jobs by 146,000, a reflection of the retail sector’s continuing troubles. Macy’s this week became the latest department store to announce job cuts: The company said it would close 125 stores and lay off 2,000 workers at its corporate offices.
At the same time, the Labor Department estimated in August that its revisions would add nearly 79,000 jobs in transportation and warehousing, a sector fueled by the rapid growth of online shopping. A category that includes newer higher-tech jobs, like data analysis, will gain an estimated 33,000 jobs.
Still, the downward revision doesn’t necessarily point to a broader slowdown in hiring. Unseasonably warm weather last month might have given a boost to January’s job growth. Warmer weather means that more construction work can be done, raising demand for workers. And restaurants and hotels tend to add staff as more Americans travel and eat out in warm weather.
China’s deadly viral outbreak has sickened thousands and shut down stores and factories in that country. But its impact likely came too late in the month to affect Friday’s U.S. jobs report.
Factory hiring, however, may be reduced by Boeing’s decision to suspend production of its troubled aircraft, the 737 MAX. The aerospace industry last year added about 1,500 jobs a month but will likely shed jobs for at least the first few months of this year.
One Boeing supplier, Spirit Aerosystems, has said it will cut 2,800 jobs. Those layoffs occurred after the government’s survey for last month, so they probably won’t show up until the jobs report for February is issued next month.
Economists will also closely watch wage data, because pay raises have slowed since early 2019 despite the ultra-low unemployment. Pay growth might have picked up slightly in January because 21 states raised their minimum wages at the start of the year, benefiting nearly 7 million workers, according to the Economic Policy Institute.
In the meantime, consumers remain confident about the economy and are spending steadily, benefiting such industries as restaurants, hotels, health care and banking.
Manufacturing also grew in January after five months of contraction, according to a survey of purchasing managers by the Institute for Supply Management. Even so, while orders and production grew, factories were still cutting jobs, the survey found. American companies as a whole have cut back sharply on investment and expansion, in part because of Trump’s trade conflicts. That pullback in spending may continue to hamper manufacturers.
Still, Americans are buying more homes, buoyed by lower borrowing costs that stem in part from the Federal Reserve’s three interest rate cuts last year. Home construction surged in December to its highest level in 13 years.
All told, economists have forecast that the economy will expand at a roughly 2% annual rate in the first three months of this year, roughly the same as its 2.1% annual growth in the final three months of last year.