- Unemployment drops to an almost eight-year low of 4.9 percent
- Hourly earnings increase 2.5 percent from a year earlier
Job growth settled into a more sustainable pace in January and the unemployment rate dropped to an almost eight-year low of 4.9 percent, signs of a resilient labor market that’s causing wage growth to stir.
The 151,000 advance in payrolls, while less than forecast, largely reflected payback for a seasonal hiring pickup in the final two months of 2015, Labor Department figures showed Friday. The jobless rate fell to the lowest level since February 2008. Hourly earnings rose more than estimated after climbing in the year to December by the most since July 2009.
The moderation in hiring still leaves the job market on solid footing and shows companies are confident about the outlook for domestic sales. A further tightening of labor conditions that sparks wage gains would help assure Federal Reserve policy makers that inflation will reach its goal.
“This is a very encouraging report -- the fact that wages rose is very important, the unemployment rate continues to go lower, and job growth at 151,000 is still a good number,” said Kathy Bostjancic, an economist at Oxford Economics USA in New York, which is among the best forecasters of the payrolls data over the past two years, according to data compiled by Bloomberg. “We can’t continue at December’s pace going forward -- that’s not sustainable.”
While employment at temporary-help agencies and couriers declined in January following a ramp-up ahead of the year-end holidays, the labor market showed strength elsewhere.
Retailers added almost 58,000 jobs last month, the most since November 2014, and the health care industry took on another 44,000 workers. Perhaps most surprising was a 29,000 gain in hiring at manufacturers, the biggest increase since August 2013.
Payrolls picked up at producers of fabricated metals, automobiles, food and furniture. Within retail, department stores and clothing outlets added a combined 26,500 jobs.
The median forecast in a Bloomberg survey called for a 190,000 gain in overall payrolls last month, with estimates ranging from gains of 142,000 to 260,000.
December payrolls were revised down to 262,000 from 292,000 and November employment was revised up to 280,000 from 252,000. The revisions to these months subtracted a total of 2,000 jobs to overall payrolls.
Friday’s data showed a much-awaited pickup in wage growth is starting to manifest itself. Average hourly earnings rose 0.5 percent from a month earlier to $25.39. The year-over-year increase of 2.5 percent followed a 2.7 percent jump in the 12 months ended in December, which was the biggest advance since mid-2009.
At least some of the increase was due to 14 states beginning the new year with higher minimum wages. Of those, 12 increased their minimums through legislation, while two states automatically boosted their wage rates through cost-of-living adjustments.
Minimum-wage legislation “may have boosted average hourly earnings a little bit for the month, but minimum wage jobs and other categories that are associated with that are still a relatively small component of the distribution of employment,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit.
The report also showed the average work week for all private employees increased by 6 minutes to 34.6 hours, the longest since August. A longer workweek often amounts to greater take-home pay for many employees.
The gain in employment combined with the increases in the workweek and wages lifted the index of aggregate weekly payrolls by 0.9 percent last month, the most since November 2014.
The Labor Department’s figures included its annual benchmark update, which aligns employment data with state unemployment benefit tax records.
The revision showed the economy created 206,000 fewer jobs from April 2014 to March 2015, in line with a preliminary projection of 208,000. Still, for all of 2015, the economy created 2.74 million jobs after 3 million a year earlier.
Additionally, the agency incorporated new Census Bureau population estimates into the household survey. The adjustment boosted the estimated size of the workforce by 218,000.
The unemployment rate, which is derived from a separate Labor Department survey of households, fell in January from 5 percent in December.
The labor force participation rate, which indicates the share of working-age people who are employed or looking for work, increased to 62.7 percent from 62.6 percent.
Fed policy makers are tracking the labor market as part of their dual mandate for maximum sustainable employment and stable inflation. The jobs data take on added meaning as other parts of the economy have shown signs of slowing.
Economic growth decelerated to a 0.7 percent annualized rate in the final three months of 2015 after growing at a 2 percent pace in the third quarter. The manufacturing sector has contracted for four months, and data this week showed the softness may be extending to services industries, which make up about 90 percent of the economy.