MercoPress. South Atlantic News Agency

US unemployment drops to 4.9% in January, but hiring is slowing down

The total number of people in work – excluding the agriculture sector – increased by 151,000. Economists had predicted 190,000.

The latest report from the United States Labor Department for January showed job gains slowed more than expected as the boost to hiring from unseasonably mild weather faded last month. However unemployment dropped to 4.9% of the workforce, the lowest in almost eight years.

The total number of people in work – excluding the agriculture sector – increased by 151,000. Economists had predicted 190,000. Data for November and December was revised to show 2,000 fewer jobs created than previously reported.

And there was good news for workers as wages rebounded sharply after holding steady in December. The year-on-year gain in earnings was 2.5%.

Also taking the sting from the softer payrolls number, 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.

Federal Reserve policymakers now have to decide if this employment report and other signs of US economic weakness justify delaying further interest rates hikes. It put up the cost of borrowing in December for the first time in nearly a decade.

Fed Chair Janet Yellen has said the US economy needs to create just under 100,000 jobs a month to keep up with growth in the US working age population.

“The lower unemployment rate and rising wages further support the view that the labor market is doing nothing but tightening,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

“Clearly, there are more uncertainties today than when the Fed raised rates in December and hinted that there could be four increases this year. But the labor market is absolutely not one of them.”

In reaction the dollar rose against a basket of currencies as traders saw more rate hikes this year. Prices for US Treasury debt fell and US stocks fell.

The latest report indicates that a tight job market could be round the corner further driving wages up and could lead to an inflationary wage-price spiral. But this danger is minimized, according to S&P economists, because broader unemployment measures suggest the labor market is not so tight.

S&P economists cite the so-called “U-6” measure, which includes the official unemployed, discouraged workers and part-timers who’d like full-time jobs. U-6 is now 9.9%; its pre-recession low was 8.4% in 2007.

The breakdown for January shows that employment gains were in the private sector, which added 158,000 jobs. The services sector dominated with 118,000 jobs created. Retail employment added a strong 57,700 after shedding 800 positions in December.

Likewise mining lost 7,000 more jobs and the embattled manufacturing sector surprisingly added 29,000 positions.

Construction payrolls rose 18,000. Courier services hiring fell 14,400. Temporary help services jobs fell 25,200 and government payrolls were cut by 7,000.-