US unemployment rate hits eight-year low

A US Department of Agriculture worker (left) interviewing a job applicant at a US Chamber of Commerce Foundation military job fair in Washington last month. The moderation in hiring still leaves the job market on solid footing and shows companies are
A US Department of Agriculture worker (left) interviewing a job applicant at a US Chamber of Commerce Foundation military job fair in Washington last month. The moderation in hiring still leaves the job market on solid footing and shows companies are confident about the outlook for domestic sales.PHOTO: REUTERS

Jobs growth at more sustainable pace with payrolls increasing by 151,000 last month

WASHINGTON • Job growth in the US settled into a more sustainable pace last month and the unemployment rate dropped to an eight-year low of 4.9 per cent, signs of a resilient labour market that is causing wage growth to stir.

The 151,000 advance in payrolls, while less than forecast, largely reflected payback for a seasonal hiring pick-up in the final two months of last year, Labour Department figures showed yesterday.

The jobless rate fell to the lowest level since February 2008.

The moderation in hiring still leaves the job market on solid footing and shows companies are confident about the outlook for domestic sales. A further tightening of labour conditions that sparks wage gains would help assure Federal Reserve policymakers that inflation will reach its goal.

"The pace in payrolls has just been outstanding - it's been way too good for the state of the economy and the world," Mr Bricklin Dwyer, an economist at BNP Paribas in New York, said before the report.

The slower rate of job growth is still "enough to push down the unemployment rate, so that's what matters for the Fed".

While employment at temporary-help agencies and couriers declined last month following a ramp-up leading into the year-end holidays, leading to a slower pace of payrolls for the month, the labour market showed strength elsewhere.

Retailers added almost 58,000 jobs last month, the most since November 2014, and the healthcare industry took on another 44,000 workers.

Perhaps most surprising was a 29,000 gain in hiring at manufacturers, the biggest increase since August 2013. Payrolls picked up at producers of fabricated metals, cars, food and furniture.

Fed policymakers are tracking the labour market as part of their dual mandate for maximum sustainable employment and stable inflation.

The jobs data take on added meaning as other parts of the economy have shown signs of slowing.

Federal Reserve chairman 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, the deceleration in employment growth could undercut the case for a Fed interest rate hike in March.

The US central bank raised its short-term interest rate in December for the first time in nearly a decade. The economy grew at a 0.7 per cent annual rate in the fourth quarter, restrained by headwinds that included the strong dollar and efforts by businesses to sell off inventory.

Even with slower job growth, wages rebounded sharply after holding steady in December. Average hourly earnings increased 12 cents or 0.5 per cent.

That left the year-on-year gain in earnings at 2.5 per cent as the unusually strong wage gains seen in January 2014 dropped out of the picture.

The unemployment rate, which is derived from a separate Labour Department survey of households, fell last month from 5 per cent in December.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on February 06, 2016, with the headline 'US unemployment rate hits eight-year low'. Print Edition | Subscribe