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Despite January’s blowout jobs number of 304,000, leading economic indicators indicate moderate gains in the coming months — and economists said a downward revision was even likely for January, given the impact of the partial government shutdown.
“I do expect there will be revisions in January as the statistical noise about how federal workers are counted will be resolved,” said Andrew Chamberlain, chief economist at Glassdoor.
The government’s annual jobs data revision, also published Friday, showed that 63,000 fewer jobs were added in the first three months of 2018 than had been previously reported. For all of last year, the revisions added 36,000 more jobs than were previously reported. December’s job gains were revised downward by 90,000.
“The labor story continues to be a very good one for the economy and suggests that this imminent fear of a recession is overdone,” said Darrell Cronk, president of the Wells Fargo Investment Institute. The labor force participation rate in January was 63.2 percent, half a percentage point higher than it was a year earlier.
“We’re trying to sort out what’s real and what isn’t,” said Mark Hamrick, senior economic analyst at Bankrate.com. He likened the impact of the 35-day shutdown to that of a large hurricane or similar event. “What we mostly have is economic activity that’s delayed or deferred,” he said.
In a note accompanying the monthly release, the Bureau of Labor Statistics addressed the shutdown question. The agency itself was not affected by the shutdown, so data collection was not interrupted, but the Bureau noted that some government employees sidelined by the shutdown might have been misclassified. This could have the effect of holding down the unemployment rate, which ticked up to 4 percent. Economists polled by FactSet had anticipated that it would remain at 3.9 percent for January.
“If the federal workers who were recorded as employed but absent from work had been classified as unemployed on temporary layoff, the overall unemployment rate would have been slightly higher,” the BLS said in its release.
Labor economists had been expecting distortion in this figure. “The unemployment rate will be the trickiest piece of this,” said Josh Wright, chief economist at iCIMS. “What we see in the jobless claims data is that not a lot of people get laid off, but it could restrain hiring,” he said.
The number of people who said they were working part-time for economic reasons skyrocketed by half a million last month, a telling jump that underscores the anecdotal reports of federal workers, government contractors and private-sector employees affected by the shutdown scrambling to pick up temporary gigs.
“Nearly all of this increase occurred in the private sector and may reflect the impact of the partial federal government shutdown,” the BLS said.
Economists said this impact could distort consumer spending and consumption data for this time period. “I think eventually other statistics will be affected,” said Gary Burtless, a labor economist at the Brookings Institution. “The thing that’s going to be tougher to work around are the actual effects on consumer spending. Bear in mind that for many, many consumer spending items, the data doesn’t really get complete for a while.”
Burtless predicted that consumer consumption data ultimately will indicate a contraction. “The fact that people were not actually receiving any paychecks may have reduced their spending on a lot of things,” he said.
Average hourly earnings in January grew by just three cents, or 0.1 percent, below the 0.3 percent expected. On an annualized basis, the rate of wage growth remained steady at 3.2 percent. “With the unemployment rate being at or below 4 percent, we’re absolutely seeing more generous wages being paid, but that’s a long time coming,” Hamrick said.
Glassdoor’s Chamberlain said his firm’s data indicates that the rate of wage growth may already have peaked. “We don’t see an escalation of pay growth. We’ve seen a flattening-off,” he said.
The data on wages is likely to become a greater focus going forward, Wright said. “This week’s Fed meeting really seemed to change the game for how we interpret the data,” he said.
With near-full employment, concern about inflation as indicated by rising wages will be the top concern for monetary policymakers, Wright said. “They mentioned the unemployment rate only once and they mentioned inflation over and over. People are going to be more focused on the wage data.”