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.
“The pace in payrolls has just been outstanding — it’s been way too good for the state of the economy and the world,” Bricklin Dwyer, an economist at BNP Paribas in New York, said before the report. The slower rate of job growth is still “enough to push down the unemployment rate, so that’s what matters for the Fed.”
While employment at temporary-help agencies and couriers declined in January following a ramp-up leading into the year-end holidays, leading to a slower pace of payrolls for the month, 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.
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.
“Job growth is very strong, real incomes are strong, productivity is very poor, but nevertheless, people have money in their pockets,” Dwyer said. “They’re going to spend that now.”
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 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.
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.