Today’s jobs report was a home run. Large employment gains, a significant drop in the unemployment rate, and details that suggest there is something big going on below the top-line numbers. There were three key positive details. First, construction employment is surging, a sign that the real estate misery might be abating. Second, manufacturing employment jumped in the sectors that are highly correlated with the automobile sector. This is a sign that consumers are finally starting to feel optimistic enough to buy cars, an observation that was confirmed in retail employment, where car dealers seem to be adding workers as well. That will have repercussions throughout the economy. Finally, the machine manufacturers are ramping up employment, suggesting that plant operators across the economy are looking to ramp up capacity.
While the headline is about January, the positive inflection of employment growth is now about three months old. This is an important observation as we look at the data because of seasonal factors. The acceleration in January might be overstated because we had the best January weather in memory. The seasonals expect a lot more snow than we had. But since the good news goes back to November, it seems unlikely that this is a big enough deal to change the bottom line.