U.S. job gains largest in 11 months; unemployment rate rises

WASHINGTON:  U.S. job growth surged in January, with employers hiring the most workers in 11 months, pointing to underlying strength in the economy despite an uncertain outlook that has left the Federal Reserve wary about more interest rate hikes this year.

The Labor Department said its closely watched monthly employment report on Friday showed no “discernible” impact on job growth from a 35-day partial government shutdown, while acknowledging it was unable to quantify the effect on private industry.

But the longest shutdown in history, which ended a week ago, pushed up the unemployment rate to a seven-month high of 4.0 percent. The report came two days after the Fed signaled its three-year interest rate hike campaign might be ending because of rising headwinds to the economy, including financial market volatility and softening global growth.

The brisk pace of hiring suggested still strong momentum in the economy, a theme that was also underscored by a separate report showing a pickup in manufacturing activity in January.

Wage gains, however, slowed, pointing to tame inflation.

“The Fed chickened out on further rate hikes this year and boy are they ever misreading the tea leaves on where the economy is going next,” said Chris Rupkey, chief economist at MUFG in New York. “U.S. companies have not let up one bit on their hiring in response to risks out there in the world economy.”

Nonfarm payrolls jumped by 304,000 jobs last month, the largest gain since February 2018, the Labor Department said. Job growth was boosted by hiring at construction sites, retailers and business services as well as at restaurants, hotels and amusement parks.

The economy, however, added 70,000 fewer jobs than previously reported in November and December. Economists polled by Reuters had forecast payrolls increasing by only 165,000 jobs in January. Roughly 100,000 per month are needed to keep up with growth in the working-age population.

January marked a record 100 straight months of job gains.

The government shutdown saw about 380,000 workers furloughed but President Donald Trump signed a law guaranteeing these employees back pay. As a result, these workers were included in the survey of employers from which the payrolls number is calculated.

The furloughed workers were, however, considered unemployed on “temporary layoff” in the separate survey of households from which the jobless rate is derived. This lifted the unemployment rate one-tenth of a percentage point from 3.9 percent in December. The shutdown ended last Friday after Trump and Congress agreed to temporary government funding, without money for his U.S.-Mexico border wall.

Average hourly earnings rose three cents, or 0.1 percent in January after accelerating 0.4 percent in December. That lowered the annual increase in wages to 3.2 percent from 3.3 percent in December, giving the employment report a Goldilocks feel.

The dollar was little changed against a basket of currencies as traders focused on the tepid monthly wage gain. Stocks on Wall Street rose, while U.S. Treasury prices fell.