The Economy

U.S. Hiring Posts Biggest Gain Since September

The unemployment rate rose to 4.8% in January and wages increased by only 0.1%, dampening hopes for a March interest rate hike.
Matthew HellerFebruary 3, 2017
U.S. Hiring Posts Biggest Gain Since September

U.S. employers picked up the pace of hiring in January but other data in the latest employment report suggested there is still slack in the labor market, dampening expectations that the Federal Reserve will raise interest rates again in March.

The Labor Department reported Friday that employers added 227,000 jobs last month, the largest gain since September. But the unemployment rate rose one-tenth of a percentage point to 4.8% and wages increased by only three cents, or 0.1%, from a month earlier and a modest 2.5% over the past year.

Economists polled by Reuters had forecast payrolls rising 175,000 last month and the unemployment rate unchanged at 4.7 percent. The economy created 39,000 fewer jobs in November and December than previously reported.

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“Some economists had expected wage growth [for the year] to exceed 3%, supported in part by increases in minimum wages across 19 states to start the year,” The Wall Street Journal noted.

A broader measure of unemployment, which includes the millions who are working part time but would prefer full-time jobs and those so discouraged by rejections that they have given up searching, also rose, to 9.4% from December’s 9.2%.

Despite the payroll gains in January, “the increase in participation and drop in wages suggest we’re not at full employment,” James Athey, senior investment manager at Aberdeen Asset Management, told The New York Times.

“This is just what the doves at the Fed wanted to see,” he added. “All of the numbers point toward it being more difficult to justify another hike in March.”

According to the WSJ, the unemployment rate rose because more Americans came off the sidelines and actively looked for work. “That helped to raise the count of unemployed but it could be a sign of increased optimism about the prospect of finding jobs,” the Journal said.

The disappointing overall wage growth reflected, in part, a slump in the financial industry, which saw a 0.1% drop in pay.

“Today’s report will probably help those at the Fed arguing for going slowly on tightening,” economist Jim O’Sullivan of High Frequency Economics said in a note to clients.

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