January jobs report: Expect to see strong but slower
hiring and an uptick in the unemployment rate
By Alicia Wallace, CNN 7 minute read Published 5:00 AM EST, Fri February 2, 2024
New York CNN — The first jobs
report for 2024, set to be released at
8:30 am ET Friday, is expected to
underscore the strength of the US
economy despite 11 rate hikes from
the Federal Reserve.
The labor market snapshot comes
just days after Fed Chair Jerome
Powell said he’s encouraged about
the healthy economy and the
downward trajectory of inflation, but
cautioned that “we still have a ways
to go” before declaring victory on the
proverbial soft landing (bringing
down inflation without raising
unemployment levels).
Economists believe the labor market
definitely still has enough fuel in the
tank to continue on that soft landing
path: They’re forecasting a monthly
gain of 176,500 jobs and for the
unemployment rate to tick higher to
3.8% from 3.7% (but staying under
4% for the 24th consecutive month),
according to FactSet consensus
estimates.
Still, between Thursday and Friday,
there is plenty of labor market data
to unpack, more noise than usual to
cut through and greater chances for
volatility.
Cutting through the noise
January is typically a big month for
job losses, with seasonal
workers being let go after the
holidays and other companies
tightening their belts at the outset of
the calendar year.
That can make the January jobs
report among the trickiest to
forecast, said Sarah House, a senior
economist with Wells Fargo.
“We’re going to have new seasonal
[adjustment] factors for a month that
is the most seasonal of any month,”
she said. “That makes it pretty
difficult just right off the bat, never
mind that we’re coming off a
December that was on the warmer
side and could have supported hiring
in December.”
To better see the underlying trend for
this and other months, the BLS
applies seasonal adjustment factors
to smooth out the data. Those are
updated annually in January.
All told, there’s a chance for an
upside surprise in the numbers,
Boussour wrote, noting that EY
expects a monthly gain of 275,000
jobs.
Friday’s jobs report also will include
the final annual benchmark review of
payroll data for the 12 months that
ended in March 2023. Preliminary
data showed that US job growth
was weaker than previously thought
by 306,000 jobs (or about 25,000
fewer per month).
“As is typically the case, we expect
the final revision to be very close to
the preliminary revision,” Boussour
wrote.
What’s with all the layoffs?
Much like this time last year,
headlines have been dominated by
large-scale layoffs
at tech, media and transportation fir
ms.
And, much like this time last year,
they’re creating some heartburn as
to whether these are signs of
broader instability in the labor
market.
But for now, they appear to be fairly
siloed, said Daniel Zhao, lead
economist at employment review
and job search site Glassdoor.
The technology layoffs appear to be
an extension of the “year of
efficiency” mantra from last year,
Zhao said, adding that these
companies appear to be
streamlining rather than acting out of
a place where they’re no longer
financially viable.
“Some of these layoffs that are more
about streamlining and getting more
efficient aren’t necessarily a risk for
spilling over into the broader
economy,” he said.
The data tends to agree: Through
December, the monthly number of
layoffs and the rate of layoffs as a
percentage of total employment
remain well below pre-pandemic
averages, according to BLS’ Job
Openings and Labor Turnover
Survey (JOLTS) data updated earlier
this week.
Also, Worker Adjustment and
Retraining Notification Act filings —
federally required notices of
impending mass layoffs or plant
closures — haven’t picked up on a
year-over-year basis, Wells Fargo’s
House said.
“Those have slowed a little bit,
signaling that we’re not about to see
an imminent pickup in layoffs unless
you really see a sharp deterioration
in demand,” she said.
Still, businesses are having to be
more disciplined in terms of their
headcount amid changing labor
market dynamics; specifically, far
fewer people are quitting, she said.
Workers are voluntarily leaving their
jobs at the lowest rate since the fall
of 2020, JOLTS data shows. The
hiring frenzy of recent years has
leveled out, and there are fewer
open jobs; plus, job-switchers have
less of a financial incentive now:
Their median annual pay gain in
January was 7.2%, the lowest since
May 2021, according to payroll
processor ADP.
“The fact that you had a sharp
slowdown in the rate in which people
are voluntarily leaving their jobs,
companies have been a little bit
caught off guard with their overall
headcount, thinking that they may be
able to manage the headcount
through attrition and finding that the
dynamics of departures have
changed dramatically,” said House.