Unemployment Rate Slightly Higher Amid Modest Job Growth Consumer confidence takes a hit from the payroll tax hike, as unemployment holds at nearly the same levels since September.
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Total U.S. nonfarm payroll employment rose by 157,000 in January, below the monthly average for 2012, and the unemployment rate held nearly steady at 7.9 percent, the U.S. Bureau of Labor Statistics said today.
Meanwhile, according to the ADP Small Business Report released Wednesday,small businesses created 115,000 jobs on a seasonally adjusted basis in January, compared to 9,000 new jobs in December. Previously ADP reported that 25,000 private sector small-business jobs were added in December, but revised the number down in January's report.
The January ADP jobs report was atypical in that growth in small business payrolls accounted for about 60 percent of the overall gains. More commonly over the past several months, small business job growth has accounted for about a third of overall job gains, according to ADP data.
Mark Zandi, chief economist of Moody's Analytics, which collaborated on the ADP report, cautioned about reading too much into this month's data. While the job numbers do seem to be improving, it may be too soon to break out the champagne.
There are still significant economic headwinds for companies of all sizes, particularly in the first half of the year. Most notably, the economy is absorbing the shock consumers are feeling over lower paychecks. In January, the payroll tax reverted to 6.2 percent, after two years at 4.2 percent, taking a larger chunk out of workers' take-home pay.
Already consumer confidence has taken a hit from the tax hike. The Conference Board's Consumer Confidence Index slid sharply in January to 58.6 percentpercent (from 66.7 precent in December), the lowest level since November 2011.
Zandi doesn't believe the return to higher tax rates will completely undermine job growth, but nonetheless, he anticipates some effect. "It is going to have a negative impact on GDP [Gross National Product] and a negative impact on job growth," Zandi says.
In January, 50 percent of the employment growth contribution within small businesses was associated with companies having between 1 and 19 employees and 50 percent of January's small business payroll growth was driven by companies with 20 to 49 employees, according to ADP.