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U.S. job growth slower than expected, jobless rate falls

 

(Reuters) – U.S. employment gains slowed more than expected in January as the boost to hiring from unseasonably mild weather faded, but surging wages and an unemployment rate at an eight-year low suggested the labor market recovery remains firm.

KEY POINTS:

* Nonfarm payrolls increased by 151,000 jobs last month and the unemployment rate was at 4.9 percent, the lowest since February 2008, the Labor Department said on Friday.

* Data for November and December was revised to show 2,000 fewer jobs created than previously reported. Economists polled by Reuters had forecast employment increasing by 190,000 and the jobless rate steady at 5 percent.

COMMENTS:

BETH ANN BOVINO, U.S. CHIEF ECONOMIST AT STANDARD & POOR’S RATINGS SERVICES, NEW YORK, NEW YORK:

“Today’s numbers are about momentum, so while 151,000 new jobs in January is below expectations and off pace from prior months, the data shows America’s recovery is continuing.

“Amid all the global economic turmoil and domestic market gyrations, positive job growth, the drop in the unemployment rate to 4.9 percent, and the uptick in wages show the U.S. is heading in the right direction.

“The jobs data will give the FOMC a lot to weigh at its next meeting, and when combined with wages ticking up to 2.5 percent year-over-year, should support those advocating for more rate hikes this year. We still expect year-over-year wages to top 3 percent by year end, and to finish 2016 with only two rate hikes. One surprising bright spot was the bounce in retail hires, suggesting Santa’s helpers were still at work after the holiday season.”

CHRIS GAFFNEY, PRESIDENT OF EVERBANK WORLD MARKETS IN ST. LOUIS:

“The pickup in average hourly earnings really gives something for the hawks on the Federal Reserve to point to and argue that wages are coming back, and therefore we should see some inflation kick back in, and that’s what they’re waiting for in order to continue their rate increases.

“March is still off the table. There’s nothing in this report to really force a March rate increase, but again the average hourly number definitely suggests that if we see continued improvement in earnings, then we can sustain more rate increases.”

MARC OSTWALD, STRATEGIST AT ADM ISI IN LONDON, POSTING IN REUTERS GLOBAL MARKETS FORUM:

“Score this 5-1 for the rate hikers! Payrolls is the one for the doves, Average Earnings, Household Labor force growth, Unemployment Rate, Total & Mfg Hours all favor the rate hikers.”

GREG ANDERSON, GLOBAL HEAD OF FOREIGN EXCHANGE STRATEGY, BMO CAPITAL MARKETS, NEW YORK:

“The headline jobs number was a little worse than expected, but there’s a couple of details in it that were shockingly good. I’m talking about the average hourly earnings and the household survey was much better than the establishment survey and we got the unemployment rate down to 4.9. So you’ve got a report where there’s something there for everybody, depending on your underlying bias.

“The pair that I think traded it most interestingly was dollar/yen and the knee-jerk response was lower just to the headline jobs number, but we’ve ended up higher as people looked at those details.

“I don’t expect much of a carry through. This is not a number that’s going to set a theme for the upcoming (US FOMC meeting). The reality is we’ve got another one before the March FOMC.

“Hourly earnings was noteworthy and if we had an FOMC (meeting) this month it would probably get a much bigger asterisk (marker) next to it.”

MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISOR AT ALLIANZ, NEWPORT BEACH, CALIF:

“Judging from the notable 0.5 percent monthly increase in hourly wages, the impressive job creation of recent years may finally be leading to more robust, and much-needed, wage growth. That, along with the reduction in the unemployment rate to 4.9 percent, a 8-year low, serves as a caution to markets that it is too early to take a Federal Reserve March hike completely off the table.”

AARON KOHLI, INTEREST RATE STRATEGIST, BMO CAPITAL MARKETS, NEW YORK:

“The market is looking at different things, we’ve got the headline, which is a little bit softer, and the average hourly earnings that are much better.

“Rates should be marginally higher on this just because the details are better. The headline today is something that most people will forget very quickly but the details are really solid, it makes the case that inflation is possible in the U.S. against the backdrop of a lot of the financial turmoil that we’ve been seeing.”

SEAN LYNCH, CO-HEAD OF GLOBAL EQUITY STRATEGY AT WELLS FARGO INVESTMENT INSTITUTE IN OMAHA, NEBRASKA:

“I’m a little surprised the markets reacted somewhat negatively to it. The number probably alleviates some of the fear the Fed may act too quickly in their next rate raise. A little bit lower number than expected and it is maybe reverting back to the mean and the average we’ve seen over the past 12 months.

“It is actually a pretty good number that should be welcomed by the equity markets, it takes some of the concern the Fed moves too quickly off the table a little bit. The only thing that might counter-balance that headline number is the average hourly earnings. That could worry the Fed a little bit and worry investors that a possible rate rise is still on the table, but we think it’s probably pushed off a little bit this year.”

MARKET REACTION:

STOCKS: U.S. stock index futures were weaker BONDS: U.S. bond prices were higher, led by weakness in the front end of the yield curve FOREX: The dollar slipped against the euro and yen very slightly

(Americas Economics and Markets Desk; +1-646 223-6300)

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