US unemployment rate falls to 8-year low

The US unemployment rate fell to an eight-year low in January as the economy created fewer jobs than expected.

The Labour Department said Friday that the US economy added 151,000 jobs in January, and the unemployment rate fell to 4.9% from 5%.

Economists had estimated job gains of 190,000 and an unemployment rate of 5%.

Wage growth was stronger than expected. Average hourly earnings rose more than expected, at 0.5% month-on-month.

Also, the labour-force participation rate rose to 62.7% from 62.6%.

In the past month, claims for unemployment insurance trended higher, and manufacturing employment worsened according to some surveys.

And, several economists wrote in previews that this jobs report could be a clue as to whether the labour market, and the broader economy, is at the beginning of a slowdown.

Deutsche Bank’s John Tierney noted to clients Friday that strong job gains above 200,000 have been boosted by reemploying the unemployed and transferring workers from non-payroll sectors. But with the unemployment rate near 5%, the excess supply could be running out.

Other economists noted, however, that we could see a temporary, seasonal drop related to layoffs on temp holiday jobs, and some form of payback after the huge 292,000 print from December.

Markets are also assessing how the Fed uses this data to update its assessment of the economy and make its next interest-rate decision in March. Before that meeting, the Fed would also have the February jobs report.

Today’s report includes the annual revisions to five years worth of jobs data.

Via Bloomberg, here’s what Wall Street was expecting:

  • Nonfarm payrolls:+190,000
  • Unemployment rate: 5.0%
  • Average hourly earnings month-on-month: 0.3%
  • Average hourly earnings year-on-year: 2.2%
  • Average weekly hours worked: 34.5

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