Employment Picture May Have Improved, but Much Depends on Struggling Hospitality and Leisure Sector

by Warrior2

Economists expect 50,000 payrolls added last month. The unemployment rate is expected to stay at 6.7%.

Today’s U.S. jobs report for January is important because it will show whether the economy is picking up strength from December’s dismal performance. This data will be used by stock investors to gauge the strength of the economy looking out three to six months. It may be used by politicians in Washington to determine whether the economy needs a $1.9 trillion booster shot. It may sway the Fed as to when it should begin tapering its bond purchases. So needless to say, all eyes will be on the numbers when they are released at 13:30 GMT.

Non-Farm Payrolls Report Consensus Forecast

Economists expect 50,000 payrolls added last month, after a decline of 140,000 in December, according to Dow Jones. The unemployment rate is expected to stay at 6.7%.

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Additionally, many economists say seasonal-adjustment factors could boost the headline payrolls number in January, making predictions for the month particularly tricky, according to the Wall Street Journal.

Seasonal adjustments take into account steep layoffs that typically occur after Christmas. And economists say there could be fewer job losses than usual this January because there were so many at the end of last year.

Friday’s report also includes annual benchmark revisions to employment, which economists expect could show slight changes to employment losses at the beginning of the pandemic.

The economy has regained about 12 million of the 22 million jobs that were lost in March and April at the onset of the pandemic and related business restrictions, the Wall Street Journal noted.Advertisement

Potential Volatility Because of Variety of Forecasts

NatWest economists raised their negative forecast to expectations for a gain of 300,000.

“We’re forecasting [an increase of] 200,000. It shows some improvement certainly relative to December, when there was a contraction,” said Michelle Meyer, head of U.S. economics at Bank of America Global Research.

“The swing factor should be leisure and hospitality because that’s where you had the biggest weakening in the December report,” she said.

Other economists are less optimistic on the job gains last month.

Michael Gapen, chief U.S. economist at Barclay’s, said he expects a negative 100,000 payrolls.

The number could be better, he said. However, Gapen does not see as much rebound in leisure and hospitality after the big December decline.

“I think the consensus says it’s a one-off,” he said. “We were kind of thinking there would be more persistence to the weakness in leisure and hospitality.”

But economists agree the goods part of the economy should continue to gain, with manufacturing potentially adding jobs.

“I suspect labor market momentum will pick up in coming months. I think the overall message from January is going to be no real incremental improvement in the labor market in January,” said Gapen. “We’ve got 10 million more jobs to recover. Averaging 200,000 a month is not going to get that done. We need to do more than that.”

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