Economic Growth Generates Job Growth - January 10, 2020

The U.S. Bureau of Labor Statistics reported that nonfarm payrolls in January increased by a strong 225,000, while the unemployment rate rose to 3.6% from 3.5%.

The mild discrepancy: the data are taken from two separate surveys, which sometimes show minor inconsistencies. In this case, we saw new folks enter the labor force looking for work, which helped account for the minor uptick in the jobless rate.

That said, it was a good report that demonstrates that modest economic growth is generating new jobs.

If we take a three-month average, which helps smooth away some of the monthly volatility, it’s clear (and encouraging) that job growth has accelerated over the last six months.

If there was a fly in the ointment, we are seeing weakness in manufacturing, which lost 12,000 jobs in January. Otherwise, many of the sectors continued to see improvement.

While we probably won’t see strong growth every month (and January’s number may have been aided by mild weather), the acceleration in job creation over the last six months is reassuring, especially in light of recession concerns that had surfaced last summer.

Meanwhile, last week’s trading was dominated primarily by the coronavirus. As the week progressed, investors piled into stocks amid fading worries over the virus’ expected impact on the U.S. economy. Upbeat U.S. economic data also aided sentiment. But we saw a modest pullback on Friday.

By week’s end, the Federal Reserve said in its Semiannual Monetary Policy Report that the coronavirus “Could lead to disruptions in China that spill over to the rest of the global economy.” Reports that people in China are staying out of public places suggest Q1 activity in China is being affected.

You see, a slowdown in China has the potential to slow U.S. exports to China and affect U.S. multinationals that conduct business in the country, at least temporarily. Additionally, any impact outside China among countries that depend on the world’s second largest economy could ripple towards the U.S.

We may see more volatility. Historically, however, global epidemics have had little longer-term influence on economic activity. If you have any questions or concerns, feel free to reach out to me.