The January employment gains, the strongest since April, are partly due to healthy payroll additions in construction, but recent data on housing construction and starts suggest residential construction contributed little.
The U.S. economy added 243,000 jobs in January, 20% more than the December increase of 203,000, pushing the unemployment rate down to 8.3% last month from 8.5% in December.
Of the January employment boost, overall construction employment rose to 5.57 million from 5.55 million. But only 2,500 of those were residential construction jobs, 61% less than the 6,400 nonresidential construction jobs added in the same period.
Analysts at Moody’s Investors Service said mild weather in January may have enabled more construction than normal. The manufacturing sector added 50,000 jobs to the economy. A number of industries from professional services to leisure/hospitality picked up hiring as well.
The faint increase of 2,500 residential construction jobs is reflective of weak housing construction spending, which in 2011 dipped 1.7% to $244.4 billion, its lowest mark since $228.1 billion 16 years ago. Government residential spending, which includes Section 8 and other public housing projects, plummeted 17% to $8.2 billion last year.
In addition to that, housing starts fell 4.1% in December, according to Commerce Department data, following a big increase in November.
The payroll gains could generate concerns about possible quirks in the data, Moody’s analysts said.
“However, there appears to be no easy explanation for humbled forecasters, other than the outsized impact of the mild January weather, which could amplify payroll gains.”
They expect modest employment growth in 2012, but below 2011 levels. The weights and threats to the recovery remain in place, including weak fiscal conditions, the expected increase in home foreclosures, the European debt crisis and slowing global growth.
“However, the very strong start to the year may also indicate that the U.S. economy is more resilient to these threats than we believe,” analysts said.
jhilley@housingwire.com
