Yet Another Booming Jobs Report Caps Historic Week for President Trump; Labor Force Participation Rate Increases!

Friday’s job report added to this week’s economic optimism. US employers added 225,000 jobs in January, which blew predictions out of the water. The unemployment rate ticked up slightly, at 3.6 percent. Wages increased 3.1 percent from the previous year; wages have grown at an average pace of 3 percent for the last 18 months.

Interestingly, the “labor-force participation rate,” meaning the percentage of Americans seeking employment, also increased. Economists have predicted that this number will decrease due to baby boomer retirement from the workforce, but this number has remained constant.

This report is an exciting finish to a week of wins for President Trump. The economy is positioned for substantial growth for 2020, which will propel GOP and Independent voters to the ballot box. An economy this transformative will be immensely difficult for Democrats to compete with. No matter how many times Sens. Elizabeth Warren (D-MA) and Bernie Sanders (D-VT) claim that only Wall Street is benefitting from the Trump economy, the average American is feeling the effects of this economic boom.

The reason why the market is in a risk-off mood and why yields are tumbling again, is because as expected, the payrolls revisions did indeed wipe out as many as 520K jobs in 2018 (as of April 2019), and the delta in December was a sizable and negative 422K, with 152.383 million pre-revision jobs contrasted to the 151.961 million post-revision.

The chart below shows the change in monthly payrolls pre and post-benchmark revision, and there are two things to note here: i) the bulk of the downward revisions took place during 2018, which means that the Fed launched its tightening cycle and was hiking rates based on false payrolls information even as yields were sliding with the bond market sniffing out the underlying misreported payrolls weakness, and ii) the February 2019 payroll gain was revised to just 1,000 from 56,000... but it was still a positive 1,000, as a negative number would have broken the string of 112 consecutive positive monthly increase in payrolls.

FROM ZERO HEDGE

Looking at the breakdown by jobs, there were notable job gains occurred in construction, in health care, and in transportation and warehousing, while manufacturing was the biggest loser, with 12,000 jobs lost.

In January, construction employment rose by 44,000, with much of this gain attributed to warm weather. Most of the gain occurred in specialty trade contractors, with increases in both the residential (+18,000) and nonresidential (+17,000) components. Construction added an average of 12,000 jobs per month in 2019.
Health care added 36,000 jobs in January, with gains in ambulatory health care services (+23,000) and hospitals (+10,000). Health care has added 361,000 jobs over the past 12 months.
Employment in transportation and warehousing increased by 28,000 in January. Job gains occurred in couriers and messengers (+14,000) and in warehousing and storage (+6,000). Over the year, employment in transportation and warehousing has increased by 106,000.
Employment in leisure and hospitality continued to trend up in January (+36,000).
Employment continued on an upward trend in professional and business services in January (+21,000), increasing by 390,000 over the past 12 months.
Manufacturing employment changed little in January (-12,000) and has shown little movement, on net, over the past 12 months. Motor vehicles and parts lost 11,000 jobs over the month.
Employment in other major industries, including mining, wholesale trade, retail trade, information, financial activities, and government, changed little over the month.

Commenting on the report, Bloomberg's Eliza Winger says "The labor market is roaring, providing an important pillar for the economy. The unemployment rate edged up, but Bloomberg Economics continues to expect it to fall to 3.3% by year-end and labor costs to intensify."

So what does this number mean for markets? As a reminder, Fed chair Jerome Powell gives his semiannual monetary policy testimony next week, and today’s jobs report supplies him with some good news to talk about, or to take partial credit for. The Fed has signaled interest rates are on hold this year, and this report confirms that outlook (unless of course China releases the real data for the coronavirus pandemic).

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