US Economy Adds 157,000 Jobs in January
Many economists are anticipating 2013 will be the year to deliver real progress towards broad-based recovery and prosperity, and several economic levers are lining up to that expectation. When it comes to job growth, the Labor Department reported 157,000 jobs were added this month which left the nation’s unemployment rate relatively unchanged at 7.9 percent. The private sector continued to be a key growth driver, primarily within retail, construction, and healthcare. Employment in retail rose by 33,000 in January, compared with an average monthly gain of 20,000 in 2012. Construction added 28,000 jobs this month primarily within specialty trade contractors (+26,000). And, healthcare continued to add jobs rising 23,000 bringing its year-over-year increase to 320,000.
Job growth is one aspect to overall economic health, but several other factors will influence this year’s overall pace of recovery, including unemployment claim activity, housing market rebound, increased energy and manufacturing production, and overall consumer sentiment.
Falling Unemployment Claims
This month witnessed a two-week decline in the number of people filing for unemployment claims, hitting the lowest level since January 2008 with first-time claims falling by 5,000 to 330,000. However, the numbers quickly jumped last week by 38,000 to a seasonally-adjusted 368,000. Although some economists attribute the volatility to a seasonal distortion that typically occurs every January, a more promising indicator is a decline in the four-week moving average which is 352,000 and just above a four-year low. During the recession, weekly claims had surged above 600,000 and stayed that way until 2011 before falling below 400,000.
Housing Market Rebounding
The housing bubble in 2008 played a large role in plunging the economy into the recession. But, encouraging signs are pointing to a housing recovery that will help lift the economy. In fact, just over half of economists surveyed by CNN Money identified a housing recovery as the primary driver of economic growth this year. Last year, home sales reached the strongest level in five years, as did home building activity, one of the strongest components of economic growth this year. Moody’s Analytics is forecasting a 50 percent rise in home building in 2013 and 2014, which it estimates will create more than 1 million new jobs.
Energy and Manufacturing Production
Domestic energy production and declining energy prices are closely tied to manufacturing production levels. The good news is we’ve seen a recent leap in energy production due to improved technology, and growth in natural gas extraction. Oil production is also on the rise, with the U.S. projected to become the world’s biggest oil producer by 2020, according to the International Energy Agency. This growth could support more than 2.5 million higher-wage jobs over the next three years alone, finds an IHS Global Insight study.
Many economists suggest that declining energy prices will drive further growth amidst the manufacturing sector. More than 500,000 industrial jobs have been created since 2010, and PricewaterhouseCoopers estimates that employment in manufacturing will rise by another million over the next 12 years or so.
Consumer Confidence and Spending
Consumer spending climbed in December as incomes grew by the most in eight years. In fact, household purchases, which make up about 70 percent of the economy, grew 0.2 percent after a 0.4 percent gain the prior month, according to the Commerce Department. Consumer confidence will play a large role in the recovery of the economy this year. Recent findings from the Randstad Employee Confidence Index showed overall sentiment decreased by 3.3 points in January to 52.1. However, we believe this may be largely connected to the higher payroll taxes for many Americans. The Index reveals only 26 percent of employees believe the overall economy is getting stronger, down five percentage points from the previous month’s reading.