U.S. jobless rate hits 8-year low, 4.9%

Feb 05, 2016, 6:10 PM EST
Source: smit5334/flickr

U.S. jobless rate hits 8-year low, 4.9%, on better-than-expected labor statistics.

Reuters reports:

U.S. employment gains slowed more than expected in January as the boost to hiring from unseasonably mild weather faded, but rising wages and an unemployment rate at an eight-year low suggested the labor market recovery remains firm. Non-farm payrolls increased by 151,000 jobs and the unemployment rate slipped one-tenth of a percentage point to 4.9 percent, the lowest since February 2008, the Labor Department said on Friday. The payrolls gain was a sharp step-down from the average 231,000 jobs per month during the fourth quarter. "The fact that payroll gains fell back to earth is not necessarily a bad sign. Most indications are that the job market in the U.S. is on solid footing and improving," said Nariman Behravesh, chief economist at IHS in Lexington, Massachusetts.

Economists had forecast employment increasing by 190,000 in January and the jobless rate steady at 5 percent. The economy added 2,000 fewer jobs in November and December than previously reported. On top of a 0.5 percent jump in average hourly earnings, which was the biggest gain in a year, employers increased hours for workers. Manufacturing, which has been undermined by a strong dollar and weak global demand, added the most jobs since August 2013. Economists said the combination of strong wage growth and falling unemployment suggested a March interest rate increase from the Federal Reserve could not be completely ruled out. The dollar rose against a basket of six major currencies on the data after hitting a roughly 15-week low on Thursday. Prices for U.S. government debt initially fell, but pared losses as stocks on Wall Street extended their decline.

The New York Times:

President Obama, who expressed frustration that he has not received the credit he feels he deserves for the country’s improving economy, said the jobs numbers were further signs of progress. “After reaching 10 percent in 2009, the unemployment rate has now fallen to 4.9 percent even as more American joined the job market last month,” he told reporters at a White House briefing in Washington. “Americans are working.” Over all, employers added 151,000 jobs last month, a pace that is strong enough to keep soaking up people looking for work if it continues in the months ahead, but a big step down from December’s revised increase of 262,000. The combination of rising pay with a slower pace of hiring and downward pressure on prices from a stronger dollar complicates the picture for the Federal Reserve as it contemplates the timing of its next interest rate increase.

Wages have shown month-to-month strength during the recovery, only to lapse back into a funk. But a slight increase in the length of the typical workweek in January also bodes well for future salary increases, as do private reports showing the same pattern. An increase in the minimum wage in more than a dozen states at the beginning of 2016 may also be giving hourly earnings an extra tailwind. A December survey by PwC, the accounting and consulting firm, showed companies budgeting for salary raises of nearly 3 percent in 2016, the biggest annual increase since the recovery began. More than a third of executives said they were worried that labor costs could eat into corporate profit margins, nearly twice the number who cited that fear a year ago. “No doubt about it, I’m hearing that executives are seeing wage pressures and not just in a few pockets of the country,” said Ken Esch, a partner at PwC. “It’s pretty broad-based.”