Payroll growth in January was disappointing: a measly 113,000 jobs, the Bureau of Labor Statistics said Friday morning, well below economists’ forecast for a gain of 180,000.
On top of that, the December payroll number — the ugly, 74,000 jobs numbers that everyone hoped would be revised up in the latest report — was barely changed.
However, the other gauge of the labor market’s health, which comes from a different BLS survey, tells a different story. The unemployment rate dropped to 6.6 percent last month, from 6.7 percent at the end of 2013.
Crucially, it did this while labor-force participation rose, meaning more people were either working or seeking work. This is what economists call a decline for the “right reasons.” In past months, however, a decline in participation — discouraged workers dropping out of the labor force — has contributed to the falling jobless rate.
The contrasting nature of the labor market’s two headline numbers reveals how difficult it is to use a single indicator when discussing the job market these days.
It’s a problem that has been acknowledged at the Federal Reserve, which has said it expects to keep its benchmark interest rate low “at least as long as” unemployment remains above 6.5 percent. Janet Yellen, the new chair of the Fed, said the unemployment rate was probably the single best indicator of job-market health last spring. But, she said, “the unemployment rate also has its limitations.”
So even though the Fed said it might start to raise its benchmark interest rate once that number reached 6.5 percent, the wiggle room afforded by this assertion — “at least as long” — in the central bank’s policy statement lets it take other variables into account: factors such as the rate at which people are quitting their jobs and getting new ones, the long-term unemployment rate, and labor-force participation.
Mohamed El-Erian, the outgoing chief executive of global investment firm Pimco, wrote in the Financial Times Thursday that he thinks the jobless rate is losing its utility . El-Erian argues that not only is the unemployment rate becoming an increasingly useless lagging indicator — how well it describes the health of the labor market — he also says it’s becoming a bad leading indicator. Specifically, he says the unemployment rate is no longer good at predicting what the Fed will do.
“The Fed is slowly extending the concept of thresholds to a wider array of variables, including more holistic measures of the labor market and, more importantly, inflation targets that are in excess of the current (and projected) rate,” he said.
The payroll pictures this month were weak. The unemployment picture was slightly better. A caveat: The survey that produces the payroll number is larger, and less volatile on a month-to-month basis. As such, economists afford its monthly reading slightly more weight than the survey that produces the unemployment readout. But to understand the labor market, we’ve got to talk about both.
What We're Following See More »
"Two North Korean shipments to a Syrian government agency responsible for the country's chemical weapons program were intercepted in the past six months, according to a confidential United Nations report on North Korea sanctions violations."
"Corporate fallout over President Donald Trump's comments on the violence that erupted in Charlottesville, Virgina continues as two more charities announced this weekend they would be canceling gala fundraisers at Trump’s Mar-a-Lago Club in Palm Beach, Florida ... In all, 14 have canceled and only two events remain: The Palm Beach Police Foundation's annual Policeman Ball and the Palm Beach County Republican Party's annual Lincoln Day Dinner, according to reports."
"Trump administration officials have told the National Academy of Sciences to cease all work on a study of the public health risks for people living near mountaintop removal coal-mining sites in Appalachian, the academy said in a statement late this morning." The Department of the Interior blamed the move on a review of contracts in the wake of a "changing budget situation."
"The Kremlin announced today that Russian President Vladimir Putin appointed Anatoly Antonov as Russia’s ambassador to the United States, replacing Sergey Kislyak. Antonov, a former deputy defense minister who has been sanctioned by the European Union for his role in Russia's takeover of Crimea in 2014, will come to Washington with a reputation as a hardline negotiator. He is best known to American officials from his time fronting Russia's negotiations at arms control talks with the Obama administration, which in 2009 produced a treaty renewing U.S. and Russian commitments to cut their nuclear arsenals. From 2011 until last December he also served as a reliable defender of the Kremlin's positions on the Ukraine crisis."
After taking fire for not forcefully condemning President Trump's statements on Charlottesville, Speaker Paul Ryan today issued a statement that takes issue with any "moral relativism" when it comes to Neo-Nazis. "There are no sides," he wrote. "There is no other argument. We will not tolerate this hateful ideology in our society." Ryan participates in a CNN town hall tonight from Racine, Wis.