January payrolls rise less than expected after bigger December drop

Washington

THE recovery in the US labour market disappointed for a second month in January with only modest job growth that highlights persistently difficult prospects for millions of unemployed and bolsters calls for more stimulus.

Nonfarm payrolls increased by 49,000 from the prior month after a downwardly revised 227,000 December decrease, while the unemployment rate fell to 6.3 per cent, according to a Labor Department report on Friday. The labour force participation rate declined as more people left the workforce.

The median estimates in a Bloomberg survey of economists called for a 105,000 gain in payrolls and an unemployment rate of 6.7 per cent. Payroll estimates ranged from a 250,000 monthly decline to a 400,000 increase.

"I'm not at all shocked that these January numbers didn't quite hit expectations. This is likely a negative trend that we should brace ourselves for until we are able to make meaningful progress on the vaccination front, and until regions are able to make solidified progress on reopening plans," said Steve Rick, chief economist, Cuna Mutual Group.

He said the business landscape is changing, noting that US factory activity is currently operating at a 13 ½ year high yet factory employment remains more than 500,000 below February 2020.

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"Moreover, business closures and consolidation will lead to long-term structural unemployment and economic scarring. With these hurdles, it could at least two years before we return to the number of nonfarm payrolls we had in February of 2020," he added.

Subadra Rajappa, head of US rates strategy at Societe Generale felt the jobs report is not bad. "You should expect a lot of volatility at a time like this. This is as close to consensus as it possibly gets," he said.

He noted: "We're very much on track to achieving that 5 per cent unemployment rate the Fed was hoping to get to this year. For Democrats who want to pass the stimulus package, they can point to these numbers as showing the need for it. Republicans can point to the unemployment rate going lower."

The January data may elicit more urgent calls for another pandemic relief package. President Joe Biden has proposed a US$1.9 trillion package, but many Republicans prefer to hold off on more assistance and wait for the December US$900 billion aid package to filter through the economy.

The weaker-than-expected report reflected job cuts in retail trade, transportation and warehousing, and leisure and hospitality, while other industries had only modest gains. The latest figures underscore a labour market that continues to struggle even as other parts of the economy have rebounded.

Restrictions on activity and businesses have eased, but fears of more contagious virus variants may curb consumer activity. BLOOMBERG, REUTERS