Employment Report: 143K Jobs Added in January, Fewer Than Expected

The latest employment report showed that 143,000 jobs were added in January, falling short of the expected 169,000. Meanwhile, the unemployment rate edged down to 4.0%.

Here is an excerpt from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:

Total nonfarm payroll employment rose by 143,000 in January, and the unemployment rate edged down to 4.0 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, retail trade, and social assistance. Employment declined in the mining, quarrying, and oil and gas extraction industry.

Household Survey Data: The unemployment rate edged down to 4.0 percent in January, after accounting for the annual adjustments to the population controls. The number of unemployed people, at 6.8 million, changed little over the month.

Establishment Survey Data: Total nonfarm payroll employment rose by 143,000 in January, similar to the average monthly gain of 166,000 in 2024. In January, job gains occurred in health care, retail trade, and social assistance. Employment declined in the mining, quarrying, and oil and gas extraction industry.

The seasonally adjusted total nonfarm employment level for March 2024 was revised downward by 589,000. On a not seasonally adjusted basis, the total nonfarm employment level for March 2024 was revised downward by 598,000, or -0.4 percent. Not seasonally adjusted, the absolute average benchmark revision over the past 10 years is 0.1 percent.

The over-the-year change in total nonfarm employment for March 2024 was revised from +2,900,000 to +2,346,000 (seasonally adjusted). Table A presents revised total nonfarm employment data on a seasonally adjusted basis from January to December 2024.

Here is a snapshot of the monthly change in nonfarm employment over the last four years. The 3-month moving average is currently at its highest level since March 2023.

PAYEMS monthly change

For another view, here is the monthly percent change in nonfarm employment since 2000. We've added a 12-month moving average to highlight the long-term trend. The latest 12-month moving average is at 168,000, up from the prior month and the highest level since June 2024.

PAYEMS Monthly Change

Unemployment, Recessions, and Market Trends

The next chart illustrates the relationship between unemployment, recessions, and the S&P Composite since 1948. Unemployment is typically a lagging indicator that moves inversely to equity prices (the top series in the chart). Notice the rising unemployment peaks in 1971, 1975, and 1982, which coincided with bear markets. A similar pattern briefly emerged during the COVID pandemic, but the impact was short-lived as irrational exuberance quickly took over.

The latest unemployment rate stands at 4.011% (to three decimal places).

Unemployment Rate and the Market

Now, let's examine the unemployment rate as a recession indicator—specifically, the cyclical troughs in the unemployment rate (UR). The next chart highlights a 12-month moving average of the UR, with its troughs marked.

Currently, the unemployment rate stands at 4.01%, slightly below the latest 12-month moving average of 4.05%. As shown in the inset table, the correlation between these moving average troughs and the start of recessions is remarkably strong. The most recent trough occurred 19 months ago, in June 2023, when the 12-month moving average of the unemployment rate fell to its lowest level since January 1970.

Unemployment Rate and Recessions

The next chart highlights the unemployment rate for those unemployed for 27 weeks or more. This rate has declined significantly from its all-time peak of 4.4% in April 2010. Following the COVID pandemic, it rose as high as 2.6% but has since trended downward. It now stands at 0.8%, down from 0.9% the previous month and at its lowest level since May 2024.

Unemployed 27+ Weeks

How long does unemployment typically last? As the next chart shows, the latest data indicates that the average duration of unemployment is 22.0 weeks. Historically, this metric tends to rise during and after recessions.

Duration of Unemployment

The Bureau of Labor Statistics’ broadest measure of unemployment, the U6 series, captures not only the unemployed but also the underemployed, marginally attached workers, and those who have stopped looking for work. Often referred to as the 'real' unemployment rate, many economists consider it the most comprehensive gauge of labor market conditions. In contrast, the more widely cited unemployment rate only includes those who are unemployed and actively job-seeking within the past four weeks.

The U6 series currently stands at 7.5%, unchanged from the previous month.

U6 Unemployment

The U6 series is currently at 7.5%, unchanged from the previous month.