We expect an increase in total employment of 60,000 jobs for January with the unemployment rate holding at 4.4% when the Bureau of Labor Statistics releases its monthly report on Friday.
Average hourly earnings should advance by 0.3% on the month, which should result in a 3.7% gain from a year ago.
Recent data indicates a slower pace in job postings but also a rebound in hiring plans by small and medium-size firms, implying further stabilization in the labor market at or above the 50,000 new jobs per month that we think is necessary to keep employment conditions stable.
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While the Conference Board’s estimate of the labor differential and the ratio of job openings denote a bit of risk to our forecast of a 4.4% unemployment rate, we are confident that the low-hire, low-fire employment narrative will remain.
Our expectation for a 3.7% annual gain in average hourly earnings will be barely above what we expect will be a 3.1% annual increase in the personal consumption expenditures index, the Federal Reserve’s preferred measure of inflation, at the end of 2025. This dynamic will surely feed into the view among many households that there is a growing affordability crisis.
One part of Friday’s jobs report that may gain more attention than the top-line number will be the annual benchmark revisions to nonfarm payroll employment, hours and earnings.
Non-seasonally adjusted data beginning with April 2024 and seasonally adjusted data beginning with January 2021 are subject to revision. Consistent with standard practice, additional historical data may be revised because of the benchmark process.
Fed Chair Jerome Powell has repeatedly stated that those downward revisions will be close to 60,000 per month inclusive of the dates covered by the benchmark. So, there will be a substantial change to total employment, most likely clustered early in 2025.
If there is not an agreement on government funding, there is a chance that another shutdown could delay the publication of the January estimate.
