Although the January increase in non-farm payrolls was lower than the sharply upwardly revised average for the three preceding months, it is still a very robust result when one considers that employment tends not to react directly and fully to changes in overall output. The reduced pace of job creation evidently reflects the weak economic activity seen in the final quarter of 2012. Labor demand would probably have been softer if businesses were not more upbeat about their sales outlook.
A more upbeat assessment along these lines was however evident in the purchasing managers’ indices for the manufacturing sector in January (Markit and Insitute for Supply Management). On top of the clear improvement in the assessment of new orders there is also evidence of a renewed pickup in inventory building.