The jobs report from the US Department of Labor is one of the most awaited and most anticipated reports. Each month it brings news about the health of the economy and the state of the recovery for better or worse. The information in this report factors into decisions made by the Federal Reserve, big business, as well as by Congress. And while December turned in an extremely disappointing report that seemed to negate all the positive momentum the second half of 2013 threw together, it will be interesting to see what light the January report can shed on the current and future state of the US economy.
December in general is an odd month for the economy. Holiday shopping, people out of school and on vacations and general cold winter weather can lead to slowdowns in the overall economy. This year featured particularly cold, miserable weather with intense cold snaps and snow storms. This has been blamed for the meager 94,000 jobs added to the economy, which is about half the average figure posted in 2013. Bill Hampel, Chief Executive of the Credit Union National Association states these December results are “less-than-believable,” any many would agree. And while upward revisions are generally expected, it is still a worrying report.
It is generally expected that the January report will be positive, posting job gains in the range of 180,000 – 190,000 new jobs and decreasing unemployment to 6.5%, a crucial number. If unemployment indeed hits 6.5%, the Federal Reserve may be inclined to finally raise interest rates, as this is the benchmark figure they have cited. But before we all get overexcited about the potential for a good jobs figure and upward revisions in December, it is important to note that January boasts some challenges as well. The Polar Vortex hit the country hard during this month, consumer confidence slumped, factory, car and home sales fell, and manufacturing sectors are all reporting disappointing results. Households are expected to slow spending through the Spring after a busy holiday season, further stifling consumption. Coupled with 1.3 million Americans losing long-term unemployment benefits and leaving the workforce altogether, this could be an even worse month than December, despite the hope everyone inherently feels.
But it’s not all doom and gloom. Even if the January number comes in below expected, the weather is a huge factor that will make the figure unlikely to be taken at face value. There is also promise in the rumors of an upwards revision for 2013 overall to the tune of 345,000 jobs that were unaccounted for. There are still numerous challenges facing the US and its recovery. Spending is also trending upward with consumers once again buying more high end products and services such as personal care, health & beauty and more. With recovery comes raising interest rates, long-term unemployed losing benefits and leaving the workforce and slumping orders from multiple sectors of the economy, all intense challenges that have to be overcome to declare the health of the economy. But we are slowly moving toward recovery, with sound economic fundamentals and steady, driving improvements. We’re still taking things slow and analyzing results month to month, making January’s upcoming jobs report a crucial beacon, lighting the way towards recovery.