U.S. employment gains slowed more than expected in January as the boost to hiring from unseasonably mild weather faded, but surging wages and an unemployment rate at an eight-year low suggested the labor market recovery remains firm.
Nonfarm payrolls increased by 151,000 jobs and the unemployment rate slipped one-tenth of a percentage point to 4.9 percent, the lowest since February 2008, the Labor Department said on Friday. The growth in January payrolls was a sharp step-down from the average 231,000 jobs per month during the fourth quarter.
“The fact that payroll gains fell back to earth is not necessarily a bad sign. Most indications are that the job market in the U.S. is on solid footing and improving,” said Nariman Behravesh, chief economist at IHS in Lexington, Massachusetts.
Economists had forecast employment increasing by 190,000 in January and the jobless rate steady at 5 percent. The economy added 2,000 fewer jobs in November and December than previously reported.
On top of a 0.5 percent jump in average hourly earnings, which was the biggest gain in a year, 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.
Economists said the combination of solid wage growth and falling unemployment suggested a March interest rate increase from the Federal Reserve could not be completely ruled out.
The dollar rose against a basket of six major currencies on the data after hitting a roughly 15-week low on Thursday. Prices for U.S. Treasury debt fell as did stocks on Wall Street.
“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.”
Tightening financial market conditions and signs that both the domestic and global economies were slowing had undercut the case for a Fed rate hike next month and lowered the probability of monetary policy tightening this year.