January jobs report: superb monthly gains, but the birds came home to roost for 2025

 

 - by New Deal democrat

This is the month the birds came home to roost, at least for the year 2025. While the month over month numbers were almost all positive, some strongly so (a repeat of what we saw last January as well, so beware unresolved seasonality), the benchmark revisions were brutal. Which is likely what the Administration was telegraphing in bright neon flashing lights the past few days. In particular, the *entire* gains for 2025 were reduced from 584,000 to 181,000 - an average of only 15,000 jobs gained per month. Also, the normal yearly revisions to the Household Survey, which gives us things like the unemployment rate, did not take place as usual this month, but have been delayed until next month. 

As per usual, I am going to report on the monthly changes below. But I anticipate there will be *much* more to say once I have digested the revisions for all of the important leading numbers. 

Below is my in depth synopsis.

HEADLINES:

• 130,000 jobs added. Private sector jobs increased 172,000. Government jobs declined -42,000. The three month average rose to +73,000.
• The pattern of downward revisions to previous months continued. November was revised downward by -15,000 to +41,000, and December was revised downward by -2,000 to 48,000, for a net decline of -17,000. 
• The alternate, and more volatile measure in the household report, rose by 528,000 jobs. On a YoY basis, this series increased 689,000 jobs, or an average of 57,000 monthly.
• The U3 unemployment rate declined -0.1% to 4.3% compared to its recent high of 4.5%.
• The U6 underemployment rate declined -0.4% to 8.0%.
• Further out on the spectrum, those who are not in the labor force but want a job now declined by -399,000 to 5.809 million..

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. These were almost all very positive:

• The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, rose 0.3 hours to 41.4hours, now down only -0.2 hours from its 2021 peak of 41.6 hours.

• Manufacturing jobs rose 5,000.
• Truck driving jobs declined -4,300.
• Construction jobs rose 33,000.
• Residential construction jobs, which are even more leading, rose 300.
• Goods producing jobs as a whole rose 36,000. 

• Temporary jobs rose 9,100.
• The number of people unemployed for 5 weeks or fewer declined -134,000 to 2,155,000.

Wages of non-managerial workers 

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.12, or +0.4%, to $31.95, for a YoY gain of +3.8%, a rebound from its post-pandemic low of 3.6%. This continues to be significantly above the 2.7% YoY inflation rate as of the most recent report.

Aggregate hours and wages: 

• The index of aggregate hours worked for non-managerial workers rose 0.4%.

• The index of aggregate payrolls for non-managerial workers rose 0.8%, and is up 5.1% YoY.

Other significant data:

• Professional and business employment rose 34,000.
• The employment population was unchanged at 64.8%.
• The Labor Force Participation Rate increased +0.1% to 62.5%.

SUMMARY

On a monthly basis, this was a very good report. Almost everything moved in the positive direction. In fact, the only negatives were a decline in trucking jobs and the continuing drumbeat of downward revisions to previous months. Everything else — positive, coincident, and lagging indicators of the employment market — were positive. 

But before you break out the champagne, keep in mind that the revisions to the past 12 months were very bad. For all of 2025, less than 200,000 jobs were added. Even with this month’s good report, the 12 month increase was only 359,000 jobs, or an average of 30,000 per month.

I’ll have more to say either later today or over the next few days once I break out the revisions for each significant statistic.

Real retail sales turn down monthly and YoY in December, boding poorly for employment

 

 - by New Deal democrat

Real retail sales, one of my favorite broad-economy indicators, was updated through December this morning — still stale by one month, as under normal circumstances January’s numbers would have been released this week. 

Still, with consumer spending being about 70% of the entire economy, this is one of the most important economic reports of the month, and along with real personal spending, the two best measures of that sector. Further, because of their leading albeit noisy relationship with employment, they are particularly important right now, with job creation on the verge of turning down. 

Nominally, retail sales were unchanged in December, after a downwardly revised +0.5% in November. After taking the monthly 0.3% increase in prices into account, real sales were down -0.3%. Since there was no October CPI report, the best we can say about November is that in real terms sales (blue in the graph below) were higher by 0.2% compared with September:

But so calculated, real retail sales in December were down -0.4% from their September peak. Further, if you believe, as I do, that the shutdown shelter kludge removed about 0.2% from consumer inflation during the September-November period, then the comparison becomes similarly worse.

Note that the above graph also shows the similar but more comprehensive measure of real personal spending on goods (gold), which did make a new high as of its most recent report for November. 

Beyond that, real retail sales turned back negative YoY for the first time since September 2024. Going back 75 years (although I won’t bother with the long term historical graph), a decline in YoY real retail sales has almost always meant a recession (but both the obvious exception in 2023!):

This is particularly salient because as I wrote above consumption leads employment. With the YoY comparison deteriorating in late 2025 and now negative, needless to say this bodes poorly for employment in the early months of this year.  Here is the update of YoY real sales and real personal spending on goods (/2 for scale) together with employment (red):

Last month I concluded that “This sharp deceleration in YoY growth in consumption forecast the slide in employment, and suggests that the jobs reports in the next several months will get no better.” This month’s report adds to the evidence. We’ll find out if that was true in January tomorrow.

Expect shelter inflation to continue abating in the next few CPI reports

 

 - by New Deal democrat

There’s no significant economic news until Wednsday’s jobs report, as to which Scott Bessent gave an interview this morning on CNBC which amounted to, “Don’t Panic!!!” Which I am sure inspires confidence in everybody (I’ve been expecting downward revisions to much of last year as part of the annual benchmarking, so that could be primarily what we will see).

Anyway, another important report later this week will be an updated CPI, as to which the important dynamics are shelter (where I’ve been expecting disinflation) and all other components (as to which I’ve been expecting re-inflation).  In any event, the BLS finally updated its “New-“ and “All Tenants Rent Index” last week. 

To recapitulate, the “New Tenants” index is very leading, but very noisy; whereas the “All Tenants” index is less leading, but generally does follow the “new tenants” index, but leads with far closer correlation the shelter component of CPI.

In Q2, the new tenants measure fell off a cliff, with an actual negative YoY number, at -2.4%, while the All Tenants component remained  positive, at +3.3% YoY. As per above, both led the shelter component of CPI:

In the Q3 report released last week, the “New Tenants” component rebounded to +1.2%, while the “All Tenants” component disinflated further, to 2.9% YoY:

Unfortunately, I haven’t been able to find a graph showing the updated “All Tenants” component, which is why I showed you the first graph above.

As I’ve been updating over the past several months, the FHFA and Case Shiller repeat home sales indexes (not shown) have been at nearly 15 year lows in the vicinity of +1.5% YoY for the past few months. The latest New- and All-Tenants Rent index confirms that disinflation in the rental market.

Because both of these lead CPI for shelter with a substantial delay, this is potent information suggesting that this important component of the CPI is going to continue to show slowing inflation from its last reading of +3.2% YoY (itself a 4 year low) in the months ahead.

Weekly Indicators for February 2 - 6 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha. 

The main movement this week was in the speculative commodity or asset area, where Bitcoin crashed and gold and silver also broke trend, taking down the broad commodity baskets with them.

But as has been true for the past number of months, it really has been the case that “the stock market is the economy,” as paper wealth gains drive real spending by the top 10% of so of consumers.

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and bring me a penny or two to buy my lunch.

December JOLTS report shows stabilizing at near stall speed, despite one negative “soft data” outlier

 

 - by New Deal democrat

I’m glad I waited a day to write about yesterday’s JOLTS report for December, because I got to read a lot of other commentary on the report, which convinced me to add some additional commentary about the entire JOLTS series. 

Let’s start with the fact that it was not “stale” inasmuch as the report was only delayed by two days. Still, it was for December, so a look in the rear view mirror. Secondly, too much commentary continues to focus on the “soft” job openings number, which over the course of its history has increased far more than any of the other series, as shown in this graph:

There are simply thousands of phantom job postings that are either permanent or designed to convince people that companies are hiring when they really aren’t. It has been a secular trend at least since the Great Recession. 

A second issue is that the monthly variations with all of the series are very noisy. For example,  for most of 2025, in contrast to much other data in the jobs sector, the JOLTS reports had been very much consistent with a “soft landing” jobs scenario. Then in October, all of the numbers were strongly recessionary. At the time I wrote that I would want confirmation for at least one or two more months before hopping on that bandwagon. And indeed, between revisions and improvements in November, October now very much appears to have been an outlier.

Similarly, yesterday there was a fair amount of commentary about a big decline in the job openings data to a new post-pandemic low. So let’s take my usual look at job openings (blue), hires (red), and quits (gold) all normed to 100 as of just before the pandemic:

 

The “soft” data of openings did decline -386,000 to 6.542 million, as indicated above a new low since the pandemic. On the other hand, actual hires rose 172,000 to 5.293 million, in line with the monthly average over the previous six months. Quits also rose 11,000 to 3.2.04 million, also solidly in their 18 month recent range. In other words, with the exception of openings, what we see is a sideways trend in all of these for the past 18 months, with a slight downward step in the past 6+ months.

On the negative side, layoffs and discharges increased 61,000 to 1.762 million, again right in the middle of its average for the past 6+ months, which range has been slightly higher than earlier in 2025:

In short, the numbers paint a picture of an employment sector that weakened in the second half of 2025, compared with the first half, but with no ongoing declining trend.

Now let me get to some additional commentary about the series as a whole. 

1. Historically, job openings have been much more volatile than hires, but on a YoY basis tend to cross the “0” threshold from expansion to contraction and visa versa contemporaneously with hires:

2. On a YoY basis, the one series for which there is some evidence of a slightly leading characteristic is layoffs and discharges (purple, inverted in the YoY graph below; all series averaged quarterly to cut down on noise):

Here is a close-up of the last year of all four data series YoY, monthly. Again, layoffs and discharges are inverted so that an increase shows as a negative number:

With just a few exceptions (March, September, November), the trend in all of the series has been negative, although quits has been positive for the past several months. This suggests a labor market which has continued to decelerate, but on a very slow basis, fitting a “soft landing” scenario.

3. Although layoffs and discharges may be slightly leading (and as I wrote a month ago, they generally lead the unemployment rate and continuing jobless claims), they are quite noisy as compared with the monthly average of initial jobless claims, which also generate fewer false signals. First, here’s the historical look:

And here is the post-pandemic look:

In other words, initial jobless claims YoY, especially as averaged monthly or on a 4 week average basis, continue to be the better indicator, and they are much more timely.

4. Finally, as I have pointed out before, the quits rate (left scale), which typically leads the YoY% change in average hourly wages for nonsupervisory workers (red, right scale), held steady in December, also in the middle of its range for the past 12+ months:

This suggests that nominal wage growth, is likely to remain stable with little variation in the next few months. at least this month. 

To conclude, December’s monthly report continued to be consistent with a “soft landing” despite the noisy downside lurch of job openings. Again, I would want to see another month or two of confirming lower readings before treating this as much other than noise in a “soft data” indicator. To the extent there is leading data in the JOLTS series which helps us forecast, as indicated just above the improvement in Quits suggests nominal wage growth will continue on trend. And layoffs and discharges suggest further slow deceleration in the employment market, but the much less noisy and current initial jobless claims data disagrees, suggesting stability albeit at a near stall over the next several months