Surprisingly Strong Jobs Report Hints at an Improving Labor Market

Jessica Mendoza (0:00)

Hey, this is Jessica Mendoza, host of The Journal Podcast, our show about money, business and power. If you're looking for more deeply reported stories like we share every day, consider becoming a subscriber to The Wall Street Journal. Visit subscribe.wsj.com/thejournal, all lowercase, to subscribe now.

Alex Ossola (0:23)

January's job numbers were the strongest in more than a year. Plus, in South Texas, immigration raids mean half-finished houses are sitting idle and empty.

Elizabeth Findell (0:32)

The effects of it trickle down because it affects the banks where builders and others are getting loans. It affects people who are waiting to buy homes or move into homes. It affects the material suppliers.

Alex Ossola (0:48)

And the federal deficit is expected to deepen by trillions of dollars over the next decade. It's Wednesday, February 11th. I'm Alex Ossola for The Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

The delayed January jobs report is here, and it's better than investors and economists had expected. The US economy added 130,000 jobs in January, its strongest growth in more than a year. The unemployment rate fell to 4.3% from 4.4%. It's a sign that the labor market is shaking off its recent slump, but can it continue? For more Behind the Numbers, I'm joined by WSJ economics reporter, Justin Lahart. Justin, the jobs numbers were more than double the 55,000 jobs economists had expected. Why were these numbers so surprising to economists?

Justin Lahart (1:40)

I think because of what they had seen over the past several months, which was very, very, very slow job growth. And also, we just don't expect to see very high job growth these days because we have such lower immigration in the country and the supply of workers is much lower than it was before.

Alex Ossola (2:00)

What are the sectors that were doing well versus not so well?

Justin Lahart (2:03)

I mean, it's mostly health care and social services are sort of adjacent to one another. There are other sectors that we saw growth in. Construction, that could reflect the data center construction going on. Manufacturing did a little better, but it's really health services, health services, health services, which has really been powering the job market for a long time now.

Alex Ossola (2:27)

And just thinking ahead to the rest of the year, can we expect this jobs growth to continue?

Justin Lahart (2:34)

We have an aging population, we have more health care needs, so it is natural to expect that we're going to see demand for these health care jobs continue.

Alex Ossola (2:46)

That was WSJ Economics reporter Justin Lahart. Thanks so much, Justin.

Justin Lahart (2:49)

Thank you.

Alex Ossola (2:50)

The solid jobs report weakens the case for more interest rate cuts and made investors more confident that the Federal Reserve will keep rates on hold. Stocks rose today after the jobs report, but the major indexes surrendered their small gains in later trading. They ended flat or slightly lower. Kraft Heinz is pumping the brakes on its breakup plan. In September, the company announced that it was splitting its condiments and grocery staples businesses. Now, Kraft Heinz says that isn't happening. Its new CEO Steve K. Helane says he's focused on returning the business to growth next year. The company is investing hundreds of millions of dollars in marketing and product development.

Steve Helane (3:28)

We want to put 100 percent of our focus, 100 percent of our time, our people, our investment against returning the company to growth and not be distracted by the massive amount of work that's required in the separation.

Alex Ossola (3:43)

The company today announced a drop in sales for the ninth straight quarter. Shares closed up 0.4 percent. And employees of American Airlines are calling for its CEO to step down. This week, directors of American's Flight Attendance Union issued a vote of no confidence in American Airlines CEO Robert Isom. And last week, the Pilots Union said it no longer believed management was improving the company's operations and financial performance. Executives at American have pledged to get the airline back on track and get delays and cancellations under control. Isom, through company representatives, declined to comment.

A new estimate out from the Congressional Budget Office today projected that the annual US budget deficit will worsen over the next decade. It's expected to deepen from $1.85 trillion this year to $3 trillion by 2036 WSJ US tax policy reporter Richard Rubin says there are three big factors behind this.

Richard Rubin (4:41)

There is really just this growth in three big things, in Social Security, Medicare, and interest. This big interest cost that covers all the debt that we've racked up in the past. And so those things are just growing faster than everything else. We're running deficits, 5.8% of GDP, heading toward 6.7% of GDP. We've done that before, but those are deficit levels that we haven't hit outside of emergencies and wars and recessions. We're not in the middle of some emergency.