Monthly US Employment Analysis - January 2020

February 2020 Monthly US Employment Analysis

Edward Leamer, Professor Emeritus, UCLA Anderson School
February 7, 2020

The January payroll release of 225,000 jobs is noticeably larger than the previous month’s revised number of 147,000. But it is difficult to discern the real meaning of the revision’s big reduction because the payroll data have some extreme ups and downs, with a big increase followed in the next month by a corrective big decrease.

The real news in these releases can be captured by two smoothed series, one based on just the overall payroll data and another one that includes components of the payroll data like nondurable manufacturing. The actual and the smoothed versions are illustrated in the figure below.

THE NEWS: Total payroll jobs appeared to increase sharply in January because December’s number was exceptionally low and not to be believed. The smoothed series based on overall job growth shows little change from December’s data, still above 200,000; however, the smoothed series that accounts for the composition of payrolls noticeably softened for the second month in a row. This is partly because of weakness in manufacturing, captured by two figures below. One figure shows the early-warning sign of weakness in manufacturing, specifically, a decline in overtime and a reduction in average weekly hours in manufacturing. The other figure illustrates no growth in jobs in durables during 2019 and a slight softening in nondurables. Expect further weakness in manufacturing in 2020.

Figure 1

Manufacturing Images

Figure 2

Figure 3

UCLA Anderson Forecast