Companies in the US added 196,000 workers in January, according to this morning’s report from the Labor Department. The gain beat expectations for a 172,000 increase, according to Econoday.com’s consensus forecast. The stronger print for the private sector isn’t really a surprise, considering the upbeat gain in the ADP Employment Report for January that was released earlier in the week. Today’s results reflect ongoing strength in the labor market, but the annual trend continues to signal that job growth, while still healthy, continues to decelerate.
Private-sector payrolls increased 1.70% for the year through last month, down slightly from 1.75% in the previous month. No big deal? Maybe, although the latest year-over-year advance marks the second-slowest annual rise in seven years. For context, the smallest annual increase since 2011 was posted last September, when private payrolls rose 1.62%.
Let’s be clear: there’s no immediate concern in today’s year-over-year results. A 1.70% increase is a solid pace that’s strong enough to keep the economy humming. But today’s numbers suggest that labor-market growth is facing headwinds at this late date in the business cycle. The expansion is currently the third-longest on record, according to NBER, and will move into second place this April. If the recovery endures through the summer of 2019 it will become the longest expansion on record, which dates to the mid-19th century.
There’s still no sign of recession risk on the immediate horizon, but it’s prudent to recognize that the recovery from the Great Recession is no spring chicken. It’s debatable if age alone is a risk factor – many economists have their doubts. But with the Federal Reserve on track to continue raising interest rates, combined with a flattish yield curve and faster wage growth (worker pay in January rose at the fastest rate in eight years), it’s reasonable to wonder if the macro headwinds are set to strengthen in the months ahead.
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