Updated: Feb 15, 2022
Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
Payrolls rose by 467,000 in January, crushing the 150,000 figure economists expected. This number is amazing considering:
1. ADP reported last week that according to their survey, private payrolls fell by 301,000 last month, and boy were they wrong.
2. The White House was telling reporters to expect a disappointing number due to the spike in COVID-19 cases as this data was being collected in early January.
3. There were still almost 11 million unfilled jobs in the U.S. at the end of December, which led us to believe that companies weren’t hiring that briskly. The Bureau of Labor Statistics—my old employer—also made some major revisions to prior data as part of its annual benchmarking process. I won’t bore you with the details of how that works, but will share the following:
December’s weak growth of 199,000 was revised up to 510,000, a whopping 311,000 revision.
November’s figure was hiked by 398,000, to 647,000.
That adds up to 709,000 more jobs added in the last two months of 2021 than we originally thought.
Therefore, you can ignore the bad things I said about those reports when they came out, and I hope November and December will accept my heartfelt apology for besmirching them. Some more good news from the January report: The labor force participation rate—the percent of working-age people either working or looking for work—rose to 62.2%, its highest level since March 2020. More people entering the workforce is exactly what our economy needs, as businesses still struggle to find workers. 19.1 million jobs have been added since April 2020, although employment is still 1.9% below its pre-pandemic level. Over the past 12 months, wages have jumped 5.7% —an impressive number until you remember inflation has been rising at a 7.1% annual pace. One bit of "meh" news (if that’s actually a thing) was the unemployment rate ticking up 0.1%, to 4.0%. This is not a big deal, as 4% is still a very low figure. A blow-away jobs figure as omicron was surging across the U.S. should certainly put us in a good mood, but I wouldn’t be an economist if I didn’t curb your enthusiasm a little. It’s great we added a record 6.665 million jobs in 2021; wages are growing at almost double their pre-pandemic rate, and the unemployment rate is just 4%. But there are some things to remember:
Inflation is running at its fastest pace in 40 years, stripping away the wage gains.
Consumer spending, which is 70% of GDP, has been flat since March.
The early estimates for GDP growth in 1Q22 are a bit scary, with the Atlanta Fed’s GDPNow forecast at just 0.1%.
All right, I’ll stop raining on the parade, especially since it’s rained so much in New York City the past few days. I’m still very optimistic about the economy this year, even with the challenges it faces in the coming months.