The Employment Report for Jan 2020 further convinces us that a secondary boom in the US economy has begun. Virtually every economic measure in the last month has exceeded expectation and the Jan 20 employment report exceeded virtually every expectation in every category. Most important in our view is that wages for hourly workers continue to rise at twice the rate of inflation (and faster than supervisory workers) AND that we are seeing 're-entrants' to the workforce. We have argued that a lack of workers could be the limiting factor in economic growth and the Jan 2020 report showed almost 200,000 people coming back to the workforce who had stopped looking for jobs. If that continues the economic benefits are threefold; government spending on the safety-net for those people decreases, and tax revenues and their personal spending increase.
Of course, there was other good news in these numbers. Not only did the actual payroll numbers exceed expectations by a whopping 50%, but the previous 2 months also had upward revisions of almost 15,000. That means the rolling 3 month average of job creation is now accelerating!
Even the increase in the Unemployment Rate is good news as it helps confirm that 're-entrants' are indeed rejoining the workforce. While manufacturing jobs were lost, that is likely due mainly to Boeing's aircraft issues and going forward, the strength in the recent Fed Regional Surveys showed an expectation in hiring in manufacturing in almost every region going forward.
The Average Weekly Hours held steady at 34.3 hours, but in the extended report showed that manufacturing hours also held steady at 40.1 hours. These manufacturing hours show little slack in capacity and as demand for manufacturing increases it likely requires more workers to increase manufacturing output.
One thing to consider is that US economic and employment growth is taking place with much of the rest of the world showing much slower or even flat economic growth. Should the rest of the world, and especially Europe, recognize that deregulation and tax cuts can massively stimulate growth they would be 'additive' to US growth creating an even greater lift. That is our expectation for the UK with BREXIT, maybe the 'continent' will accept that and come along.
The fundamentals of the US economy remain strong. The demographic shift of Millenials, increasing wages, the need for housing construction, and discouraged workers now returning to the workforce are all signs that the next round of growth is going to boom.