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 151,000 jobs last month, the Labor Department said Friday, the weakest reading since September and well off last year’s average monthly gain of 228,000. 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 $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 labor 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.
Friday’s 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 Friday, and U.S. crude oil fell 2.6% to $30.89 a barrel.