U.S. payrolls rise 111,000 in January
Data support the case for a soft-landing scenario, economists say
By Greg Robb, MarketWatch
Last Update: 11:28 AM ET Feb 2, 2007
WASHINGTON (MarketWatch) -- The nation's labor market softened slightly in January, good news for investors worried about the Federal Reserve hiking interest rates, economists said Friday.
Nonfarm payrolls increased by 111,000 in January, the Labor Department reported, growth tat was below market expectations calling for an increase of about 170,000 jobs.
And the jobless rate ticked up to 4.6% in January, marking the highest rate since September. In other signs of weakness, wage growth eased and the workweek declined in January. Read full government report.
The unemployment rate had been expected to hold steady at 4.5%. See Economic Calendar.
Economists said the employment data would warm the hearts of Fed policymakers.
"The January employment report paints a perfect picture of the U.S. economy and labor markets making a 'soft landing,' " said Stuart Hoffman, chief economist at PNC Financial Group Inc., in a research note.
The U.S. central bank chose to hold its overnight interest-rate target at 5.25% earlier this week. But Fed policymakers pointed to tightness in the labor market as the reason why they may have to hike rates again in coming months to combat inflation. Read full FOMC coverage.
Although the economy slowed in the second and third quarter, the labor market remained tight. Fed officials described this as a puzzle.
However, Friday's report suggests that the weakness may just have been delayed. See Capitol Report.
"The report supports the view of an extended Fed hold on interest rates," said Nigel Gault, U.S. economist for Global Insight.
Many economists cautioned that it was much too early to say the labor market was weakening.
They noted that the report contained significant upward revisions for the fourth quarter. The government raised its estimate of job growth in the October-through-December quarter by a net 104,000 jobs.
In any case, the report was not weak enough to revive talk of rate cuts, analysts said.
It will take a "sustained" increase in the unemployment rate before the Fed would consider easing monetary policy and steering rates lower, said David Bezic, economist at CIBC World Markets.
Details of the report
Average hourly earnings increased by 3 cents, or 0.2%, to $17.09 in January. Hourly earnings are up 4.0% in the past year. Hourly earnings in December were revised down slightly to a 0.4% gain, compared with the initial estimate of a 0.5% increase.
The average workweek fell by six minutes to 33.8 hours in January from 33.9 hours. Total hours worked in the economy fell by 0.1%. Hours worked in the manufacturing sector fell by 12 minutes to stand at 40.8 hours, and factory overtime also declined.
In January, most of the job growth came from the services sector.
Service-producing industries added 104,000 jobs, including 31,000 in education and health services and 25,000 in professional and business services. Retail added 4,000 jobs.
Government added 14,000 jobs.
Goods-producing industries added 7,000 jobs, while construction spending added 22,000.
Manufacturing firms lost 16,000 jobs last month. Jobs declined in the sector despite the settlement of a 12-week strike at Goodyear Tire & Rubber Co. (GT :
The Goodyear Tire & Rubber Company
Friday's employment report also contains the Labor Department's annual benchmark revisions.
Greg Robb is a senior reporter for MarketWatch in Washington.
By Greg Robb, MarketWatch
Last Update: 11:28 AM ET Feb 2, 2007
WASHINGTON (MarketWatch) -- The nation's labor market softened slightly in January, good news for investors worried about the Federal Reserve hiking interest rates, economists said Friday.
Nonfarm payrolls increased by 111,000 in January, the Labor Department reported, growth tat was below market expectations calling for an increase of about 170,000 jobs.
And the jobless rate ticked up to 4.6% in January, marking the highest rate since September. In other signs of weakness, wage growth eased and the workweek declined in January. Read full government report.
The unemployment rate had been expected to hold steady at 4.5%. See Economic Calendar.
Economists said the employment data would warm the hearts of Fed policymakers.
"The January employment report paints a perfect picture of the U.S. economy and labor markets making a 'soft landing,' " said Stuart Hoffman, chief economist at PNC Financial Group Inc., in a research note.
The U.S. central bank chose to hold its overnight interest-rate target at 5.25% earlier this week. But Fed policymakers pointed to tightness in the labor market as the reason why they may have to hike rates again in coming months to combat inflation. Read full FOMC coverage.
Although the economy slowed in the second and third quarter, the labor market remained tight. Fed officials described this as a puzzle.
However, Friday's report suggests that the weakness may just have been delayed. See Capitol Report.
"The report supports the view of an extended Fed hold on interest rates," said Nigel Gault, U.S. economist for Global Insight.
Many economists cautioned that it was much too early to say the labor market was weakening.
They noted that the report contained significant upward revisions for the fourth quarter. The government raised its estimate of job growth in the October-through-December quarter by a net 104,000 jobs.
In any case, the report was not weak enough to revive talk of rate cuts, analysts said.
It will take a "sustained" increase in the unemployment rate before the Fed would consider easing monetary policy and steering rates lower, said David Bezic, economist at CIBC World Markets.
Details of the report
Average hourly earnings increased by 3 cents, or 0.2%, to $17.09 in January. Hourly earnings are up 4.0% in the past year. Hourly earnings in December were revised down slightly to a 0.4% gain, compared with the initial estimate of a 0.5% increase.
The average workweek fell by six minutes to 33.8 hours in January from 33.9 hours. Total hours worked in the economy fell by 0.1%. Hours worked in the manufacturing sector fell by 12 minutes to stand at 40.8 hours, and factory overtime also declined.
In January, most of the job growth came from the services sector.
Service-producing industries added 104,000 jobs, including 31,000 in education and health services and 25,000 in professional and business services. Retail added 4,000 jobs.
Government added 14,000 jobs.
Goods-producing industries added 7,000 jobs, while construction spending added 22,000.
Manufacturing firms lost 16,000 jobs last month. Jobs declined in the sector despite the settlement of a 12-week strike at Goodyear Tire & Rubber Co. (GT :
The Goodyear Tire & Rubber Company
Friday's employment report also contains the Labor Department's annual benchmark revisions.
Greg Robb is a senior reporter for MarketWatch in Washington.
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