Markets Brace for Rocky January Jobs Report
NEW YORK (
) -- The jobs market probably hit another speed bump last month.
Ahead of Friday's report from the government, economists are still warning that any meaningful recovery in the jobs market is still likely to be painfully slow. Making matters worse, January's data are likely to be hampered by additional seasonal factors.
Economists expect 150,000 new jobs for last month, with companies adding 170,000, according to estimates from
Thomson Reuters
. The unemployment rate is likely to remain at 8.5%.
Some experts are forecasting an even lower payrolls number in anticipation that January will be a "payback" month. Hiring by couriers and messengers helped boost December's numbers at 42,000. Furthermore, warmer weather prevented a drop in construction employment during December.
Dan Greenhaus, strategist with BTIG, notes that a "payback" trend has been seen in previous January results. For example, the messengers sector added 46,000 new jobs in December 2010 before losing 49,000 the following month.
Mark Vitner, economist with Wells Fargo, expects 122,000 in nonfarm payrolls. He adds that some of the construction jobs may be reversed. His unemployment forecast is 8.4%, but he warns that the rate will likely tick up later this year in light of recent layoff announcements, including over ten thousand cuts by
American Airlines
announced on Wednesday.
Vitner estimates that some 77% of the jobs added since the recession were in relatively low paying industries such as temporary staffing and hospitality, which he says is a sign that the health of the jobs market is weaker than most believe. Also, the number of young people who have dropped out of the workforce has been skewing the unemployment rate lower. Vitner says that it is difficult to pinpoint just how many jobs the economy needs to add every month to bring out the real unemployment rate, given that those who were without work long term begin to trickle into the workforce. The economy usually needs to grow faster than 2.5% in a year for the unemployment rate to drop, but the rate fell in 2011 even as the year saw the economy grow by 1.7%, he notes.
For perspective, it's worth looking at the labor market since the recession. In 2008 and 2009, the economy saw a net loss of jobs every month -- with the exception of Jan. 2008 -- according to data from the Labor Department. The jobs market was still gloomy in 2010, which saw an average of 78,000 new jobs per month.
Then, 2011 figures inspired some hope for a turning point. Fears from the summer that the economy would fall off a cliff slowly faded. In the four months of September through December, nonfarm payrolls gained by 210,000; 112,000; 100,000; and 200,000 respectively. Initial jobless claims began to ticking below 400,000 by November.
But still, the number of jobs being added is far from 250,000 each month, a threshold often cited as the minimum needed to bring unemployment down. Automatic Data Processing's payrolls estimate on Wednesday showed that companies likely added 170,000 new jobs in January after 292,000 in December.
Markets largely shrugged off ADP's release even as it slightly missed the consensus forecast. If investors shrug off tomorrow's report, it may be yet another confirmation of low expectations have gotten.
-- Written by Chao Deng in New York.
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