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Payrolls grew by 165,000, still solid albeit less than December's blockbuster surge of 312,000, while the unemployment rate held near the lowest since 1969 and wages continued rising at the fastest annual pace in almost a decade, according to economists surveyed by Bloomberg. However, the data will likely contain more distortions than usual, making it harder to gauge the underlying health of the job market.
The report is due as scheduled on Friday at 8:30 a.m. in Washington, as the Labor Department wasn't affected by the five-week partial shutdown.
While parts of the report -- such as the labor force size, jobless rate and hours worked -- may reflect the shutdown, those effects would likely be temporary, and unusual weakness may be attributed to data distortions rather than seen as a cautionary sign, economists said.
The January advance in payrolls would follow the best year of hiring gains since 2015 and still signal support for consumer spending, the biggest part of the economy.
"The big picture hasn't changed," said Michael Englund, chief economist at Action Economics. "The labor market will remain strong," though observers will be looking closely for any effects of the shutdown, he said.
Matching the past year's strength in employment growth won't be easy. Businesses continue to cite a shortage of skilled workers as a restraint on hiring, and the economic expansion is forecast to soften as the tax-cut tailwinds fade, the tariff war weighs on the outlook and global growth cools.
"Aside from shutdown effects, the health of the labor market remains solid," said Carl Riccadonna and Tim Mahedy of Bloomberg Economics. "We project a payback in January relative to the gangbusters December outcome (which produced a 312k-plus gain and an additional 58k in upward revisions to the prior two months), but this does not mark the start of a new trend of sub-200k payrolls."
With the economy near the Federal Reserve's full-employment objective and inflation around its target, policymakers this week indicated they'll be "patient" on any future interest-rate moves.
"My colleagues and I have one overarching goal: To sustain the economic expansion with a strong job market and stable prices," Chairman Jerome Powell said in a press conference Wednesday.
The shutdown was in effect for the week that included Jan. 12 -- the reference period for both the household survey, which produces the jobless rate, and the survey of establishments, which provides the payroll and wage figures.
Hundreds of thousands of federal employees who were furloughed will be counted as on payrolls and will get back pay. But workers in related businesses, such as contractors, lost hours and earnings they may never fully recoup.
The experience of prior shutdowns may offer some clues for Friday's report. After the 16-day closure in 2013, household employment and the labor force contracted in October, only to quickly bounce back.
"The household survey could be unintentionally affected by the government shutdown," Ward McCarthy, chief financial economist at Jefferies, wrote in a research note. As in the past, when responding to the household survey about their employment status, some furloughed employees may "misunderstand" the question, he said. He estimates the indirect effect of the shutdown suppressed January private payrolls by about 20,000.
A separate Labor Department report Thursday showed filings for unemployment benefits jumped last week to the highest since September 2017, possibly reflecting holiday-related swings and the partial government shutdown. In other data, U.S. employment costs rose less than expected in the fourth quarter, though still at a pace indicating employers are paying more and boosting benefits to attract and retain workers.
For the jobs data, economists in the Bloomberg survey estimate private hiring grew 175,000 in January, following December's 301,000 gain.
The shutdown impact may also be reflected in the unemployment rate, which probably held steady at 3.9 percent, instead of declining further amid the tight labor market, economists said.
Wage gains probably cooled on a monthly basis, Bloomberg's survey shows. Still, the projected 3.2 percent annual gain would amount to five of the most recent six months posting at least 3 percent growth, indicating the labor market continues to tighten.
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