Job engine roars as Obama hands reins to Trump

The unemployment rate ticks up to 4.8% in January as more people look for work.

WASHINGTON — Surprisingly robust job gains last month demonstrated that President Trump took office amid a solid labor market that might have been boosted by optimism about his promises of pro-business policies.

But the Labor Department data released Friday also indicated more work is needed in the recovery from the Great Recession.

The report showed that stubbornly slow wage growth remains a challenge for workers, and a potential caution flag for Federal Reserve officials as they consider if the economy is strong enough to handle additional increases in a key interest rate.

The topline numbers, however, were excellent, economists said.

The U.S. added 227,000 net new jobs, the most since September. And although the unemployment rate ticked up to a still-low 4.8%, that was largely because more people came off the

sidelines to look for jobs.

“He inherited a generally healthy job market that still shows some scars from the recession and financial crisis,” Mark Hamrick, senior economic analyst at financial information website Bankrate.com, said of Trump.

“It might take a little examination to see those scars, but those wounds are partly what helped to propel him to office,” Hamrick said.

Here are five things we learned from the January report.

Trump gets a much better jobs landscape than Obama did. Before a White House meeting with business executives, Trump said he was “very happy” with the job growth.

“There’s a great spirit in the country right now,” Trump said.

“I think it’s going to continue big-league,” he said. “We’re bringing back jobs. We’re bringing down your taxes. We’re getting rid of your regulations. And I think it’s going to be some really very exciting times ahead.”

The January jobs report was the final one for the Obama administration. The data were collected in the middle of last month before Trump took office. But job growth might have been influenced by increased business and consumer confidence after Trump’s election, Hamrick said.

When Obama took office in January 2009, the economy had shed 791,000 net jobs that month alone. The unemployment rate had risen to 7.8% on its way to a 26-year high of 10% by the fall of 2009.

Job growth returned for good the following year as the unemployment rate slowly declined.

Stuart Hoffman, chief economist at PNC Financial Services Group, said the economy is “firing on most cylinders” and Trump must figure out how to get the rest going.

“He’s inheriting a very healthy labor market and a healthy economy,” Hoffman said. “Obviously some of his core voters don’t feel that way. But overall the unemployment rate is under 5% and jobs have been growing for seven years.”

Construction work is gaining speed. The year kicked off with strong job gains boosted by jumps in construction and retail hiring, the Labor Department said.

The job growth was up from 157,000 in December. Although the January figure greatly exceeded expectations, that was somewhat offset by a downward revision of job growth the previous two months, by a total of 39,000 net new positions.

Those changes meant that job growth averaged 187,000 for 2016.

The construction industry had a big increase in hiring in January, adding 36,000 net new jobs compared with just 2,000 the previous month, the Labor Department said. January was the industry’s best month of job growth in nearly a year.

Retailers had a strong month, increasing their payrolls by 45,900 last month, up from 33,500 in December.

But state and local governments shed a total 14,000 net jobs. And factory payroll growth slowed. Manufacturers added 5,000 net new jobs last month after an 11,000 gain the previous month.

More people came off the sidelines. The unemployment rate last month inched up a tenth of a percentage point to 4.8%, but that wasn’t bad news.

The uptick was largely caused by 584,000 more people looking for work last month after accounting for annual adjustments made to U.S. population figures.

The percentage of working-age Americans in the workforce rose to 62.9% in January. That was the best level since September.

Hoffman said the uptick in the labor force participation rate was a good sign.

“People feel more confident,” he said. “They’re out there looking for jobs. Not all of them got them, but most of them did.”

Wage growth is stubbornly slow. The recovery from the Great Recession has been plagued by sluggish growth in wages. Hopes were raised when average hourly earnings jumped significantly in December for the second time in three months. That pushed annual wage growth up to nearly 3%, the best rate in more than seven years.

But average hourly earnings in January increased just 3 cents to $26. And the Labor Department revised down December’s increase.

For the 12 months that ended Jan. 31, wages rose 2.5%. That was the lowest annual rate since August.

The slower wage growth came even though worker pay got a boost last month because minimum wage increases kicked in on Jan. 1 in 19 states. In California, the minimum wage rose to $10.50 an hour, from $10.

Fed officials could have rate-hike concerns. Fed policymakers inched up their benchmark short-term interest rate in December for the first time in a year and signaled three more small hikes in 2017.

Although the job market is approaching the central bank’s level of full employment, the slower wage growth could give the Fed pause. The interest rate increases are designed to stave off high inf lation, but it will be difficult for prices to increase much if worker pay isn’t rising more quickly, economists said.

“It’s not about the number of jobs created but the quality of jobs created translating into a rise in wages,” said Lindsey M. Piegza, chief economist at brokerage firm Stifel Nicolaus & Co.

If wage growth remains sluggish, the Fed might hold the rate at its current target range of between 0.5% and 0.75% for longer than anticipated, analysts said.