Less jobs added to US economy in January 2016

Less jobs added to US economy in January 2016

The U.S. job engine slowed in January while unemployment hit an eight-year low and wage growth accelerated, complicating the outlook for Federal Reserve officials as they assess whether the economy is strong enough for further interest-rate increases

Employers added 151000 jobs last month, the Labour Department said on February 5, 2016, the weakest reading since September and well off last year’s average monthly gain of 228000. The unemployment rate fell to 4.9 %, falling below 5 % for the first time since February 2008 just as the recession began.

A jump in wages offered hope that a long-missing ingredient of the 6½-year expansion could be taking shape. Average hourly earnings for private-sector workers surged 0.5 % from December to USD 25.39, the second-strongest monthly gain of the expansion. Wages were up 2.5 % from a year earlier, a pace that could reassure central bankers that overall inflation will return to a healthier pace with a tightening labour market.

The report “turns the screws on the Fed in terms of the divergences they’re facing” between weak inflation and job creation, said Josh Wright, chief economist at recruiting software firm iCIMS and a former Fed staffer.

The announced mixed jobs reading left investors uncertain about the strength of the U.S. economy amid slowing growth in China and other overseas economies. The Dow Jones Industrial Average fell 211.61 points, or 1.3 %, to 16204.97 on the day of announcement, and U.S. crude oil fell 2.6 % to USD 30.89 a barrel.

The ambiguous jobs report followed recent signs the U.S. economy lost steam due to the softening global economy, plummeting oil prices and the effects of a strong dollar, which discourages tourism and eats into some companies’ profits by making their products more expensive overseas.

Gross domestic product, the broadest measure of economic output, expanded at a 0.7 % seasonally adjusted annualized rate in the fourth quarter, the Commerce Department said last week. Other reports showed the nation’s manufacturing sector contracting into 2016.

The US manufacturing index

The ambiguous jobs report followed recent signs the U.S. economy lost steam due to the softening global economy, plummeting oil prices and the effects of a strong dollar, which discourages tourism and eats into some companies’ profits by making their products more expensive overseas.

Gross domestic product, the broadest measure of economic output, expanded at a 0.7 % seasonally adjusted annualised rate in the fourth quarter, the Commerce Department said last week. Other reports showed the nation’s manufacturing sector contracting into 2016.

www.wsj.com


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