January jobs report preview: Economy likely added back 105,000 payrolls as jobless rate held steady at 6.7%

The U.S. economy likely resumed adding back more jobs than it lost in January, as easing stay-in-place restrictions and fiscal stimulus measures out of Washington alleviated some of the pressure on the labor market.

The U.S. Department of Labor is set to release its monthly jobs report Friday morning at 8:30 a.m. ET. Here were the main results expected from the report, compared to consensus estimates compiled by Bloomberg:

  • Non-farm payrolls: +105,000 expected, -140,000 in December

  • Unemployment rate: 6.7% expected, 6.7% in December

  • Average hourly earnings, month-over-month: 0.3% expected, 0.8% in December

  • Average hourly earnings, year-over-year: 5.0% expected, 5.1% in December

December’s net payroll decline — the first since April — came as the badly beaten-down services sector shed more jobs as new lockdown measures came into effect. Employment in the leisure and hospitality industries alone dropped by nearly 500,000, primarily due to layoffs and weak hiring trends at bars and restaurants. That left the leisure and hospitality with a total deficit of 3.8 million jobs since before the pandemic, comprising a significant portion of the total 9.8 million jobs lost on net since February 2019.

These pressures likely began to ease in January, however, as some lockdown measures were rolled back.

“We expect to see payroll growth gathering momentum, starting as soon as February, in the wake of the reopening of outdoor dining in California, indoor dining in Michigan and Colorado, and the scattered easing of restrictions elsewhere,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note. “The reopening process is headed in only one direction, provided the U.S. is not overrun by the more infectious UK COVID variant before the vaccination program confers herd immunity.”

Other measures in the December jobs report had hinted at a tentative firming in labor market conditions. The number of so-called permanent job losers decreased by 348,000 to 3.4 million at the end of last year, albeit while still holding 2.3 million higher than from February 2019. And outside of leisure and hospitality, other industries including professional and businesses services and even retail trade added back an increasing number of payrolls in December.

However, job gains in these other parts of the U.S. services economy may have moderated in January after already making up significant ground over the past couple months.

“Consistent with slow improvement in continuing jobless claims, we expect further moderation in employment growth for other industries that have been less affected by the pandemic,” Nomura economist Lewis Alexander wrote in a note Thursday. “However, we believe those industries will still contribute around 200k to top-line NFP [non-farm payroll] growth, down from roughly 280k during December.”

A number of other new economic data topped expectations this week, offering hope of a stronger and faster than expected labor market recovery. ADP reported that private payrolls jumped by 174,000 in January, or more than double the consensus estimate, and new weekly jobless claims improved to a two-month low at the end of January.

Still, the timing of the survey period for the monthly January jobs print may mean that Friday’s report understates the degree of improvement in the labor market in just the past few weeks. The survey week for the monthly jobs report took place during the week including 12th of the month, or around the time when initial jobless claims spiked to a five-month high of more than 900,000.

This post will be updated with the results of the Labor Department’s jobs report Friday morning at 8:30 a.m. ET. Check back for updates.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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