Economy delicate, but many optimistic

Others warn of small but growing threat of new recession

WASHINGTON — Consider looking past January’s so-so job growth. At first glance, Friday’s government report on U.S. hiring was a downer — 151,000 added jobs, well below the pace of the previous few months.

Yet once you take a fuller view, a brighter picture emerges: A sub-5 percent unemployment rate. Healthy pay raises. And a stream of people who grew confident enough in the job market to start looking for work.

“The January report is a solid report in disguise,” said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and president of the conservative American Action Forum.

That seems especially true given that the job gains come at a delicate time for the U.S. economy. Analysts have warned that the economy faces a growing risk of another recession within a year or two.

Economic weakness overseas and reeling financial markets have slowed growth and squeezed manufacturers.

Last month’s pay raises and the addition of retail jobs suggest that consumers have the resilience to bolster growth. Average hourly wages have jumped 2.5 percent over the past 12 months.

The strong fundamentals in the jobs report could make the Federal Reserve somewhat more likely to raise rates again this year — a prospect that likely contrib-

uted to a sharp sell-off in stocks. The Dow Jones industrial average tumbled 211 points or about 1.3 percent.

“The wage numbers were the most encouraging bit of news all around,” said Carl Tannenbaum, chief economist at Northern Trust.

With the unemployment rate now 4.9 percent — its lowest level since 2008 — many workers have managed to gain raises because their employers have to compete for talent.

Wage growth is a crucial indicator for the Fed, which is weighing whether to raise interest rates in the face of global risks that could imperil broader economic growth. The Fed wants to see earnings accelerate after years of sluggish gains.

In December, the Fed boosted rates from record lows. But investors have largely dismissed the likelihood of a rate hike at the next Fed meeting in March. The January jobs report, with a slowdown in job growth but a pickup in wages, complicates the outlook for the Fed.

“Nobody really knows what to do with this jobs report — and ultimately for the Fed it may not matter because we’ll get another jobs report before the March meeting,” said Megan Greene, chief economist at Manulife Asset Management.

January’s hiring, though modest, followed robust job growth of a seasonally adjusted 280,000 in November and 262,000 in December.

But meanwhile, corporate profits are declining and goods are piling up on warehouse shelves.

Those trends have elevated concern that a recession may loom in the next year or two. Most analysts say that while the economy may slow this year, an outright recession remains unlikely.

Economists at Bank of America Merrill Lynch have put the odds of a recession within the next 12 months at 20 percent. While still low, that estimate is up from 15 percent last year.