The unemployment rate inched up to 7.9% and payrolls increased 157,000 in January. The major job gains were in retail trade, construction, health care, and wholesale trade. During the week that the Bureau of Labor Statistics (BLS) measured the pulse of the labor market, the nation had unseasonably warm weather. That could have increased the number of construction jobs reported. The BLS “seasonally adjusts” the numbers, but that adjustment is based on the calendar, not the weather. Also, firings in the retail trade area were earlier this year—right after the holiday shopping spree—so that could have skewed the numbers.
This report also contained benchmark revisions to the payrolls data, where the BLS changes previously reported numbers in light of more complete information. For all of 2012, on average, payrolls increased by 181,000 per month. Before the revisions, the average was 153,000. The revisions adjusted up all months’ payroll gains, except July and August, which were revised down 28,000 and 27,000, respectively.
More important than the January employment report will probably be reports on retail sales and consumer spending in January. Those reports, coming out on February 13 and March 1, respectively, will give a picture of how workers are adjusting to their payroll tax rates increasing. Yes, we got some consumer sentiment and consumer confidence numbers in already that were not positive, but those are notoriously bad at showing how consumers will actually act. There is a big difference between what people say (as reported in the confidence and sentiment numbers) and what they actually do. I think the sales numbers won’t be all that bad as consumers will likely simply cut their savings rate instead of making major changes to their spending patterns. If I’m right, that could be good for equities.