We revised our payroll forecast higher after positive ADP and ISM data. The +49k outcome was closer to our revised +85k forecast than our original -90k, but on the private sector, where employment rose by only 6k, our original -50k call was closer than our revised +125k.
Revisions were negative in March, November and December but positive in all but one intervening month, making the recent loss of momentum look steeper. December’s payroll loss came solely on a 536k plunge in leisure and hospitality. That sector fell by only 61k in January, still the weakest sector but implying a significant slowing elsewhere, though jobs still managed a marginal increase.
A strong bounce in the workweek saw aggregate hours rise by 0.9%, a firmer than expected start to Q1. December saw the workweek decline sharply in retailing and leisure/hospitality, but these sectors largely erased their December losses in January, a sign that activity is recovering even if jobs were lost. Even outside these sectors the average workweek increased in January, with most sectors up from November as well as December. A firmer workweek in January and lower initial claims since January’s payroll was surveyed are positive signals for February employment, particularly with the COVID infections showing signs of peaking.
The unemployment rate of 6.3% from 6.7% was well below expectations, with the labor force falling and the household survey’s employment estimate outperforming the payroll. However a participation rate unchanged from January 2020 would deliver am\n unemployment rate of 9.2%.