US non-farm payrolls jump by 225,000 in January

Hiring in the US accelerated by more than expected at the turn of the year alongside a pick up in wage growth, helped by the third mildest weather for the month of January on record.

According to the Department of Labor, non-farm payrolls increased by 225,000 in January, vaulting past the median 160,000 gain forecast by the consensus.

Average hourly earnings also picked up the pace by more than anticipated, rising at a 3.1% pace year-on-year versus 2.9% in the month before (consensus: 3.0%).

The proportion of people out of work also surprised to the upside, with the rate of unemployment ticking up by a tenth of a percentage point to 3.6% from the month before (consensus: 3.5%).

However, increased unemployment was a result of more people going out and looking for work, which pushed the labour force participation rate up from 63.2% in December to 63.4% for January.

There were 5.89m Americans searching for jobs last month, up from roughly 5.75m during the previous month, while the ranks of the employed dipped from 158.8m to approximately 158.71m.

Estimates of the number of employed and non-farm payrolls are sourced from two different surveys, the so-called Household and Establishment surveys, respectively.

In the Establishment data, services accounted for the bulk of hiring, with an increase of 174,000, led by gains of 28,300 in Transportation and warehousing and of 47,200 in Leisure and Hospitality.

Goods-producing sectors meanwhile took on 32,000 more staff, with 44,000 job gains in construction offset by a 12,000 person drop in manufacturing.

In other details, the length of the average work week was steady versus November at 34.3 hours, while the index of aggregate weekly hours, which is akin to a monthly measure of GDP, was up by 0.2% month-on-month.

Revisions to the NFP figures for the prior two months were small, just a combined 7,000.

To take note of, Labor published its annual benchmark revisions alongside the January report, which showed that employment (as per the establishment survey) as of March 2019 was 514,000 less than previously thought, and yet those revisions were not as bad as some analysts had feared.

On the flip side, non-farm payroll growth between April and December of the previous year were marked up by a cumulative 92,000, explained Paul Ashworth at Capital Economics.

Ashworth credited milder weather in the US - it was the third mildest January on record - for part of the strength in NFP and the uptick in labour force participation.

But in commenting on the stronger-than-expected hiring in the backhalf of 2019, he went on to add: "[...] That means the rebound in employment growth in the tail end of last year only looks stronger now, suggesting that the economy has more momentum than we previously believed."

"Unsustainable, but the trend is still pretty strong [...] The uptick in unemployment likely means nothing; the household survey reports an implausible 89K drop in employment, which makes no sense and will reverse," chipped in Ian Shepherdson at Pantheon Macroeconomics.

"The survey is much less reliable than the payroll numbers, but it tends to tell the same story over time. If job growth is sustained at anything like its recent pace, the unemployment rate will fall over the next few months."