The first jobs report of the Trump era just dropped and it was better than expected.
In January, the US economy added 227,000 jobs while the unemployment rate rose slightly to 4.8%. Economists were looking for payrolls to grow by 180,000 with the unemployment rate expected to hold steady at 4.7%.
Wage gains in January, however, were a disappointment, as average hourly earnings rose just 0.1% over the prior month and 2.5% over last year. Economists were looking for a 0.3% improvement over last month and a 2.8% jump over last year.
The disappointing wage data is notable for the Federal Reserve, as an increase in wages is seen not only as giving weight to the idea that the US economy is at full employment, but typically signals a coming increase in inflation. A faster-than-expected rise in inflation could urge the Fed to move to raise interest rates faster than markets expect.
Elsewhere in the report, weekly hours worked ticked up to 34.4 from 34.3 and the labor force participation rate rose to 62.9% from 62.7%. The underemployment rate, which captures workers who are working part-time but would prefer to have full-time work, rose in January to 9.4% from 9.2%. The rise in the labor force participation rate is what bumped up the unemployment rates.
Following Friday’s report, Neil Dutta, an economist at Renaissance Macro said, “[The] Fed has no need to rush. Participation rate rose and hourly earnings were soft but workweek extended and jobs rose nicely.”
The uptick in the labor force participation rate is, aside from the headline job gains, perhaps the most positive part of this report, as it indicates folks who had likely been completely done looking for work again sought to come back into the labor force. This broadly squares with improving consumer and business sentiment readings we’ve seen since the election, as taking the leap of faith to move from not looking for work at all to attempting to find a job requires some level of confidence about the economy.
The November and December jobs reports were also revised, with these revisions taking 39,000 job gains away from what had been previously reported. Over the last three months, job gains have now averaged 183,000.
On an industry basis, manufacturing employment rose by just 5,000 in January, while construction jobs increased by 36,000 during the month. The biggest industry gain was retail, where nearly 46,000 jobs were added in January. Government employment fell by 10,000 during January.
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Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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