HFF Analysis of the January 2017 BLS Employment Report

Tuesday, February 7, 2017

HFF is pleased to report on the latest employment expansion statistics from January 2017. Our research team analyzes trends and data to give readers a better view into the current state of the economy and how employment is being affected.

Employment Expansion

U.S. job growth accelerated in January as non-farm payrolls rose by a higher than expected 227,000. Wage growth slowed to 2.5 percent, which was below expectations. Payroll creation has averaged 201,000 since October 2010, marking the 76th month of consecutive growth. The labor force participation rate moved up to 62.9 percent in January, from 62.7 percent the prior month, yet it still continues to hover near a four-decade low. The unemployment rate ticked up slightly to 4.8 percent in January.

Average Monthly Payroll Creation Slowing

Current expansion cycle similar to 1991 to 2000 and greater than 2004 to 2007 expansionary period, but only after a significantly delayed recapture of the nation’s previous employment peak.

The U.S. created 2.16 million jobs in 2016, the smallest gain for a calendar year since 2011. The last six years’ job growth is on par with the expansionary period from 1992 to 1995. 

In 2016, the U.S. created 2.16 million jobs. But nearly 32 percent of private-sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low-paying sectors. Combined, Retail Trade (229,000) and Leisure & Hospitality (347,000) created approximately 576,000 jobs in the year ending January 2017, accounting for some 25 percent of the headline growth nationwide. Retail Trade accounts for 62 percent of the headline Trade, Transportation & Utilities growth. We can therefore assume continued broad-based growth in the retail and industrial property types as we progress deeper into the economic recovery.

Professional Business Services, the industry sector most closely aligned with office using employment, experienced expansion of 574,000 jobs in the year ending January 2017, the highest of any major employment sector. Fortunately, Temporary Staffing only accounted for 94,000 (approximately 16 percent) of these positions. Temporary Staffing is slowing, however, implying hesitance in hiring the lowest cost employees companies can find in tentative expansions.

Education & Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 556,000 jobs in the year ending January 2017. Mining & Logging and Manufacturing continue to undermine headline growth with approximately 56,000 jobs being lost in the year ended January 2017.

Unemployment Rate

The Underemployment Rate augments the Unemployment Rate to include anyone marginally attached to the Labor Force that is either not employed or employed only part time. Fortunately, the Underemployment Rate has descending from a recent high of just over 17 percent. However, the spread between the two rates is near an all-time high and shows no sign of rapid compression. The Unemployment Rate ticked up to 4.8 percent in January, but remains historically low. The Underemployment Rate rose to 9.4 percent in January.

Wage Growth

As the labor force approaches “full employment,” much attention has been cast to wage growth. The past three recessions were preceded by a period of FOMC tightening. Average hourly earnings growth exceeded four percent in each of these periods as overall economic activity became reflected in strong wage growth. With the current year-over-year percent wage growth registering approximately 2.5 percent, one could argue overall economic activity has not yet reached levels that precede recessionary periods (often accompanied if not triggered by FOMC tightening to counter inflationary forces).

Sources:  Bureau of Labor Statistics, HFF Research

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