U.S. Starts Year With Job Surge, but Pay Gains Are Weak


For policy makers at the Federal Reserve and elsewhere who have been debating whether employment is near capacity and the danger of inflation lurks, January’s report signals that there is still slack in the labor market.

President Trump, who previously dismissed the jobs estimates as “phony numbers,” said on Friday that this latest report showed there was a “great spirit in the country right now.”

Representative Kevin Brady of Texas, the Republican chairman of the Ways and Means Committee, said in a statement: “Today’s jobs report is good news. Our economy is gaining some ground — but we have a lot of work ahead of us to get our economy running at full speed.”

For Americans who have been cut out of the rewards delivered by the nearly eight-year recovery, the economy’s weaknesses are all too clear. A mismatch of skills or location, a lack of support like child care and employer discrimination are some of the reasons that high school graduates, laid-off factory workers, members of minorities, aging baby boomers and others have failed to find or regain a comfortable footing in the labor force.

The share of working-age adults who are in the labor force is still at historical lows, but it bumped up to 62.9 percent, a sign that at least some sidelined workers have returned and that still more might consider doing the same. A broader measure of unemployment, which includes the millions who are working part time but would prefer full-time jobs and those so discouraged by rejections that they have given up searching, also rose, to 9.4 percent from December’s 9.2 percent.

Economists at Moody’s Analytics noted in a report this week that at least five other measures, aside from the official unemployment rate, indicated that the economy had not yet reached full employment, including the share of those not in the labor force who want a job, the magnitude of the pool of long-term unemployed and the degree of wage growth.

Revised estimates from December and November cut 39,000 jobs from previous totals, although other adjustments made by the Labor Department showed the overall job creation for 2016 was better than previously reported.

However strong (or weak) last month’s figures are judged to be, they are a legacy of the Obama administration, based on surveys before Mr. Trump took office on Jan. 20. Some employers may have made staffing decisions in anticipation of a Republican administration, but this report does not reflect any specific policy changes. (The way the government estimates the jobless rate does not change from one administration to the next.)

Still, given the timing, the January job figures end up serving as one benchmark against which a new president’s stewardship of the economy is judged.

During the campaign, when the official unemployment rate never rose above 5 percent, Mr. Trump called the jobless measure “one of the biggest hoaxes in American modern politics” and suggested that the true rate could be several times as high. Steven Mnuchin, his choice for Treasury secretary, said “the unemployment rate is not real” at his confirmation hearing last month, while Andrew Puzder, who was nominated to take over the Labor Department, has belittled the figure’s usefulness. (A survey last fall found that nearly half of Mr. Trump’s supporters “completely distrust the economic data reported by the federal government.”)

Regardless of government estimates, however, employers across sectors and across the nation have increasingly complained about the difficulty of finding workers, a competition that has kept wage growth somewhat ahead of a 1.6 percent price inflation rate.

Photo

Construction of the new Tappan Zee Bridge in Tarrytown, N.Y. Analysts expected the first month of 2017 to have better results than December, when the economy gained 156,000 jobs.

Credit
Fred R. Conrad for The New York Times

“We’re still continuing to see wage pressure as the candidate market continues to shrink,” said Amy Glaser, senior vice president of Adecco Staffing USA, which has 300 branch offices. In addition to the omnipresent hunger for engineers, Ms. Glaser said there is a demand for those with middle-level trade skills like welding that fell into disuse during the recession, as well as entry-level warehouse and light-assembly workers.

“Employers are getting very creative,” said Ms. Glaser, whose office is in Lexington, Ky. “We’re seeing sign-on bonuses. They have added sabbaticals to their packages, increases to stock options, free child care on site and free meals. Anything to get a competitive edge.”

“I’m definitely seeing a trend of employers targeting certain pools of workers like the disabled, retirees that may be looking to return to the work force and stay-at-home moms,” she added.

Companies that employ trade workers like welders and mechanics are increasingly joining with community colleges, technical schools and even high schools to develop a new generation of skilled employees. Other businesses are experimenting more with apprenticeships and internships.

David Nilssen, chief executive of Guidant Financial, a small-business financier based in Seattle, added 30 additional employees last year to its 80-person work force. The trouble he has had recruiting and retaining staff members was echoed in a Guidant survey of about 2,000 clients, who listed the worker shortage as their main challenge.

“A lot of small and mid-sized businesses are facing what I call a war for talent, especially tech talent,” Mr. Nilssen said, explaining that it was harder for them to compete with larger salaries and perks offered by bigger firms.

The picture for manufacturing was more mixed. January showed a gain of 5,000 positions, which, as Mr. Tannenbaum of Northern Trust said, is “always a plus” given the impact of technology. But those additions were countered by a revised estimate that showed December’s gains were smaller than first reported. (The Labor Department will issue one more revised estimate for December, and two more for January.)

At the lower end of the pay scale, local minimum-wage increases — ranging from as small as 5 cents an hour in Florida and Alaska to $1.95 an hour in Arizona — affected approximately 4.3 million workers across 19 states in January. The widest impact was felt in Arizona, California and Washington, where more than 1 in 10 workers got a raise.

Employees in Oregon, the District of Columbia and Maryland are scheduled to get an increase this year.

The disappointing overall wage growth can be traced to the financial industry, which saw a 0.1 percent drop in pay.

Analysts, backed by research from the Federal Reserve, have been recalibrating their measures of what constitutes a strong number of hires, given how far the headline unemployment rate has fallen. Economists estimate that it takes 50,000 to 110,000 new jobs to absorb growth in the population and keep the jobless rate steady. That has prompted several economists to label the creation of 150,000 jobs or more a solid showing; that figure is below the average monthly gains of 180,000 in 2016 and 220,000 in 2015.

Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former director of the Congressional Budget Office, characterized the January report as “very strong, with very little weakness.”

“The outstanding question is whether this is a one-month spike or a signal of new strength in trend growth,” he said.

Other analysts sounded a more cautious note. James Athey, senior investment manager at Aberdeen Asset Management, said that despite the payroll gains in January, “the increase in participation and drop in wages suggest we’re not at full employment.”

“This is just what the doves at the Fed wanted to see,” he added. “All of the numbers point toward it being more difficult to justify another hike in March,” when the central bank next meets to decide whether to raise its benchmark interest rate.

According to a fourth-quarter survey of 400 business leaders by the consulting firm PricewaterhouseCoopers, a tiny but growing number planned layoffs. “A lot of companies are starting to think about cost-cutting for the year ahead,” said Ken Esch at the consulting firm, which “could result in some lower hiring levels.”

Mr. Trump, who ordered an across-the-board hiring freeze for the federal government last week, has pledged on the White House website to create 25 million new jobs — a staggering number that would eclipse the total number of private-sector jobs created during Ronald Reagan’s eight-year tenure, George Bush’s four-year term and George W. Bush’s eight years combined.

Correction: February 3, 2017

Because of an editing error, an earlier version of this article attributed a quotation incorrectly. It was Representative Kevin Brady of Texas, not President Trump, who said, “Today’s jobs report is good news.”

Correction: February 3, 2017

An earlier version of this article misstated the share of working-age adults who are in the labor force. It is 62.9 percent, not 67.9 percent.

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