Stock prices surged on Friday after the Bureau of Labor Statistics released its employment report. Investor sentiment had been declining in the latter half of the week ever since the Commerce Department release a downbeat GDP report on Wednesday, which showed that the US economy contracted during the 4th quarter of 2012. The January payrolls report was highly anticipated, as benchmark revisions incorporated new census data.
According to the Department of Labor, non-farm payrolls increased by 157,000 in January, slightly softer than the 160,000 increase expected by economists. The unemployment rate ticked higher to 7.9% from 7.8% in December which was a reflection of an increased participation rate. The participation rate which reflects the number of individuals looking for full time work increased to 63.6%. The U6 unemployment rate, which counts part-time workers looking for full time work remained steady at 14.4%.
The revisions to November and December payroll report were the impetuous that helped drive equity prices higher. November non-farm payrolls were revised higher by 86,000 jobs to 247,000 while the December payroll number was revised higher by 41,000 jobs to 202,000. Private sector jobs in November and December combined increased by 458,000 which reflect an economy that is producing above trend private sector jobs.
Private sector jobs increased in January by 166,000 jobs. Retail jobs increased by 33,000, while construction jobs increased by 28,000. Declines in the private sector came in the transportation industry which experienced losses of 8,000 jobs. Government jobs declined by 9,000 in January, which reflects the overall decline in government spending. Government spending accounted for a decline of 1.5% of GDP, which is likely to continue to be a headwind for overall job creation.
The workweek continued to remain stable at 34.4 hours per week in January which was unchanged from the December reading. The average hourly earnings figure declined by .1% in January to .2% for the month. Long term unemployed remained stable at 47 million.
The jobs report was not the only economic release in the US on Friday. Consumer sentiment for January printed a final report of 73.3. Additionally, the Institute of Supply Management released its January manufacturing survey. Generally this is viewed as a forward looking survey that measures manufacturing based on a diffusion index.
According to the ISM, the headline manufacturing number increased to 53.1 which is the highest seen since April of 2012. The employment sub-index increased to 54, which was better than the 51 that was expected by economists. Employment in manufacturing increased from 51.9 in December. This comes on the heels of a better than expected Chicago PMI index which was released on Thursday by the ISM. The new orders sub-index increased to 53.3 from 49.7, which bodes well for future manufacturing activity. The prices paid sub-index also increased, to 56.5 from 55.5 in December.
Construction Spending in December increased by .9% better than the .6% expected by economists. November Construction Spending was revised higher to .3% from the initially reported at .1%.