Job Growth In January Tapers Off

(MarketWatch) - The up-and-down US economy might be finding a more stable path, but there are sure to be some big bumps along the way.

One of them might come this week with the release of January's monthly employment report. It is the highlight of a heavy week of data that also includes auto sales, personal income and another snapshot of the US manufacturing sector.

The number of jobs created in January is expected to drop to 125,000 from an originally reported increase of 200,000 in December, according to a MarketWatch survey of economists. That is barely enough to keep up with the natural growth in the labor force.

Call it the Amazon-and-FedEx effect. Part of the reason economists expect a sharp decline is because the government likely overstated job growth in December. Last month, one-fifth of new hiring involved couriers used to deliver packages purchased over the internet from companies such as Amazon.

Economists say it is almost certainly a mistake: the government's process for seasonal adjustments still do not fully adjusted for the emerging internet-based economy.

"The increase [in couriers] should reverse completely," said Yelena Shulyatyeva of BNP Paribas.

Any increase significantly less than 125,000, however, could raise alarms. While most economists expect US growth to slow in the first quarter -- mainly as companies reduce excess inventories -- the prevailing view is that the expansion will accelerate again in late spring and summer.

The reasons: A steady increase in hiring will inject more consumer spending into the economy while the relatively healthy manufacturing sector will continue to expand.

The Institute for Supply Management's activity index, released Wednesday morning, is forecast to climb to 54.9 percent in January from 53.9 percent.

Economists will also pay close attention to monthly auto sales. Auto sales, also issued Wednesday, are expected to tally about 13.5 million, virtually unchanged from December.

Yet some analysts suggest auto sales could taper off. And if demand for autos subsides, retail sales might also slacken as they did in December. That would further contribute to a softer economy in the first half of 2012 since consumption accounts for as much as 70 percent of US growth.

Consumers might also choose to put more money in the bank to pay down purchases largely made with credit. The personal savings rate fell to 3.7 percent in the fourth quarter of 2011 compared to 5.2 percent one year earlier.

"This continues to be a recovery of fits and starts," said Michelle Meyer, senior economist at Bank of America Merrill Lynch.

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