Weekly Economic Trends and Indicators

The Headline:

On Friday, the Bureau of Labor Statistics (BLS) reported that nonfarm payroll employment increased by 353,000 in January. This was well above expectations as most expected under 200,000 jobs. The unemployment rate was unchanged at 3.7% where it has remained since November. Average hourly earnings rose about 5.5%, while average hours fell slightly.

In a separate report, the BLS reported on payroll jobs for December for metropolitan areas including the Quad Cities metro area. Total nonfarm payroll employment in the Quad Cities was an estimated 185,300 in December, which was up by 1000 jobs from a year ago and roughly on par with the level of employment before the pandemic.

The Details:

Both the national and local employment numbers reflect strong economic growth. However, the sectors showing the strongest growth differ between the national and local economies. Employment was strongest at the national level for sectors such as health care, professional and business services and retail trade. At the local level, government employment grew the most last year with 2,600 net new jobs. This includes all levels of government including public education. The leisure and hospitality sector grew by 1,200 net new jobs last year and is now above pre-COVID levels. Professional and business services (one of the hottest categories of jobs nationally) decreased by 2,800 locally. Private education and health care increased modestly by 400 jobs. Most other categories were essentially unchanged locally.

The Context:

Yet again, we see economic data coming in better than expected, confounding the many analysts who looked for economic weakness by now. This is why Federal Reserve Chair Jerome Powell stated last week that an interest rate decrease in March is “probably not the most likely case.” Indeed, as long as the job market remains tight, GDP is growing, and inflation is still above target, it is hard to make the case that the economy needs monetary stimulus.

That being said, growth is far from consistent across sectors of the economy. Even from one region to another, there can be differences in how interest rates have impacted the local economy. As noted above, the sectors growing the fastest nationally were not the fastest growing locally except for health care, which is forecasted to grow in most regions due to an aging population.

This is not necessarily a bad thing. Having some sectors move out of sync with national trends can provide a cushion during a national downturn. It can also make a region a destination for investment if there are workforce capacities that are more plentiful compared to other regions.

If we can avoid recession and broaden the expansion to a wider variety of industries, this presents opportunities for areas like the Quad Cities. Productivity growth is critical to prolonging the expansion. We will take up the topic of productivity later this month.

Next week: Financial market conditions