US Unemployment Rises To 4%, January Payroll Blows Away Estimates

U.S. unemployment rose from 3.9 percent to 4 percent in January, ending a six-month streak in the threes, according to the Bureau of Labor Statistics.

Non-farm payroll expansion of 304,000 jobs far exceeded 165,000 estimates. Wages grew 3.2 percent year-over-year to a rate of $27.56 to sustain a 10-month streak above 3 percent.

Non-farm payrolls for December was revised from 312,000 to 222,000, while private payrolls was revised from 301,000 to 206,000.

What Happened

All recorded industries contributed to the payroll growth, with none showing signs of contraction.

The 380,000 furloughed federal workers counted as “employed” in the Establishment Survey, which calculates payroll numbers, but unemployed in the Household Survey, which calculates unemployment rate. Those who continued to work through the shutdown without pay were marked “employed” in both surveys.

It’s worth noting that, by the end of January, weekly jobless claims had popped to their highest level since September 2017, although unemployment claims trickled to a 49-year low.

"The reason I think the market is kind of staying at the Mendoza line with is because people don’t know what to do with it," said TD Ameritrade Chief Market Strategist JJ Kinahan. "The government shutdown is confusing because you have all these jobs being created, but the unemployment rate going higher because you have these people being included in number one and not the other. I find it hard to believe there won’t be some revision to this number next month."

What’s Next

The Federal Reserve said Wednesday it would maintain interest rates through the first half of 2019. Ongoing trade negotiations may yet disrupt the labor market and warrant rate adjustment to stimulate or slow the economy.

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