January U.S. Labor Report


Last Friday, the Department of Labor released its nonfarm payroll report for the month of January. In the wake of its release, the business media has centered attention on the second consecutive monthly disappointment. Some have even suggested it is a harbinger of economic contraction in 2014 – quite the opposite for the consensus growth expectations of December 2013.

However, investors should view Friday’s report with a “wait and see” attitude. In fact, that is exactly what the Federal Reserve will be doing, as its next meeting is not until March 19. The Fed will have the added benefit of the February nonfarm payroll report release and possible clarity on the U.S. debt ceiling deadline.

Many of you on social media inquired on Friday and throughout this weekend whether I would provide details of the monthly labor report in the Virtus “Market Insights” page as I have done in past months. Quite honestly, I view the report as incredibly distorted and confusing and, for that reason, was very hesitant to post at all. However, perhaps by answering your requests and chronicling the report, investors will agree with me that no portfolio decisions or market bias should be formulated from the report.

January Nonfarm Payroll Report – Confusing on Multiple Fronts…

  • Nonfarm payrolls (Figure 1) rose 113,000 from last month’s +75,000; however, was below consensus estimates for +180,000
  • Private payrolls (Figure 2) rose 142,000 from last month’s +89,000. Again, below consensus estimates of +185,000.
  • The unemployment rate (Figure 3) fell to 6.6% from 6.7% last month
  • The labor force participation rate rose to 63.0% from 62.8% last month
  • The underemployment rate fell to 12.7% from 13.1% last month
  • The 3-month average for nonfarm payrolls is +154,000 versus 2013’s +193,500
  • Average weekly hours worked were unchanged at 34.4
  • Average hourly earnings month-on-month rose +0.2% from unchanged last month
  • 262,000 households were not at work due to weather, unchanged from January 2013
  • Manufacturing payrolls rose 21,000, above last month’s +8,000 and consensus estimates for +10,000
  • Construction payrolls rose 48,000, much better than last month’s decline of 22,000
  • Private service providers rose 66,000, below last month’s +102,000
  • Retail payrolls declined (-13,000), the largest decline since June 2012
  • Education and health services declined 6,000, the largest decline since September 2004
  • Government payrolls declined 29,000, the largest decline since October 2012. Of that decline, 12,000 jobs were at the federal level and 17,000 at the state and local level

Figure 1: U.S. Nonfarm Payrolls Prior 5 Years

Source: Bloomberg

Figure 2: U.S. Private Payrolls Prior 5 Years

Source: Bloomberg

Figure 3: U.S. Unemployment Rate Prior 5 Years

Source: Bloomberg

Past performance is not a guarantee of future results.

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.