US job growth likely slowed in Jan­uary

The Pak Banker - - BUSINESS -

U.S. em­ploy­ment gains likely slowed in Jan­uary as the boost to hir­ing from un­sea­son­ably mild weather faded, but an ex­pected re­bound in wages and a steady job­less rate will sug­gest the la­bor mar­ket re­cov­ery re­mains firm. Non­farm pay­rolls prob­a­bly in­creased by 190,000 jobs last month, ac­cord­ing to a Reuters sur­vey of econ­o­mists.

Though that would be a sharp step-down from the 292,000 jobs cre­ated in De­cem­ber and the av­er­age 284,000 po­si­tions per month in the fourth quar­ter, it would largely re­flect pay­back af­ter the warm­est tem­per­a­tures in years bol­stered hir­ing in weather-sen­si­tive sec­tors like con­struc­tion. Jan­uary em­ploy­ment will also lose the lift from the hir­ing of couri­ers and mes­sen­gers, which was buoyed in Novem­ber and De­cem­ber by strong on­line hol­i­day sales.

"Pay­roll growth has been run­ning above trend over the past three months," said Dana Sa­porta, an econ­o­mist at Credit Suisse in New York. "It's rea­son­able to ex­pect a slower pace of pay­roll growth in the Jan­uary data. Any­thing close to fore­cast will pro­vide fur­ther ev­i­dence the la­bor mar­ket is still very strong."

But com­ing in the wake of an abrupt slow­down in eco­nomic growth in the fourth quar­ter and a sharp stock mar­ket sell- off, the La­bor Depart­ment's closely watched em­ploy­ment re­port could add to con­cerns the U.S. eco­nomic out­look was de­te­ri­o­rat­ing. De­spite the ex­pected slow­down in job growth, the un­em­ploy­ment rate was fore­cast hold­ing steady at a 7-1/2-year low of 5 per­cent for a fourth straight month. Fed­eral Re­serve Chair Janet Yellen has said the econ­omy needs to cre­ate just un­der 100,000 jobs a month to keep up with growth in the work­ing age pop­u­la­tion.

Against the back­drop of tight­en­ing fi­nan­cial mar­ket con­di­tions, a de­cel­er­a­tion in em­ploy­ment growth would fur­ther un­der­cut the case for a Fed in­ter­est rate hike in March. The U.S. cen­tral bank raised its short-term in­ter­est rate in De­cem­ber for the first time in nearly a decade. "We should rec­og­nize that the fourth quar­ter (job growth) was bloated by fa­vor­able weather con­di­tions and Jan­uary was not," said Ray Stone, an econ­o­mist at Stone & McCarthy Re­search As­so­ciates in Prince­ton, New Jersey.

"If I were on the Fed­eral Re­serve's pol­icy com­mit­tee, it would not re­ally change my mind. Mar­kets have been tur­bu­lent, fi­nan­cial con­di­tions are less ac­com­moda­tive now ... I may be less in­clined to tighten now that I was in De­cem­ber." The econo- my grew at a 0.7 per­cent an­nual rate in the fourth quar­ter, re­strained by head­winds that in­cluded a strong dol­lar and ef­forts by busi­nesses to sell off in­ven­tory.

Even with slower job growth, wages are ex­pected to re­bound af­ter hold­ing steady in De­cem­ber. Av­er­age hourly earn­ings are fore­cast in­creas­ing 0.3 per­cent. None­the­less, the year-on-year gain in earn­ings is ex­pected to drop to about 2.3 per­cent from 2.5 per­cent in De­cem­ber as the un­usu­ally strong wage gains seen in Jan­uary 2014 drop out of the pic­ture. But with the job­less rate in a range most econ­o­mists as­so­ciate with full em­ploy­ment, wage growth is ex­pected to pick-up this year.

With its Jan­uary em­ploy­ment re­port, the govern­ment will pub­lish its an­nual "bench­mark" re­vi­sions and up­date the for­mu­las it uses to smooth the data for reg­u­lar sea­sonal fluc­tua- tions. It will also in­cor­po­rate new pop­u­la­tion es­ti­mates.

In an early bench­mark es­ti­mate last year, it said the level of em­ploy­ment in March of last year was likely 208,000 lower than it had re­ported. The shift in pop­u­la­tion con­trols will mean fig­ures on the la­bor force or num­ber of em­ployed or un­em­ployed in Jan­uary will not be di­rectly com­pa­ra­ble to De­cem­ber.

The la­bor force par­tic­i­pa­tion rate, or the share of work­ing-age Amer­i­cans who are em­ployed or at least look­ing for a job is near four-decade lows. Low par­tic­i­pa­tion could crimp job growth as the sup­ply of la­bor shrinks, un­less a sig­nif­i­cant rise in wages lures more peo­ple back into the la­bor force. In Jan­uary, em­ploy­ment gains were likely con­cen­trated in the ser­vices sec­tor, with min­ing prob­a­bly los­ing more jobs and man­u­fac­tur­ing re­vers­ing some of De­cem­ber's gains.

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