The sell-off on Wall Street came following the release of a Labor Department report showing disappointing job growth in January but also a drop in the unemployment rate to a almost eight-year low.
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That left the year-on-year gain in earnings at 2.5 percent as the unusually strong wage gains seen in January 2014 dropped out of the picture.
Job growth in the US slowed sharply last month, the latest in recent signs of economic weakening amid turbulent global financial markets, lower corporate profits and a contracting manufacturing sector at home.
The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job is near four-decade lows. January figures show that hospitals and outpatient clinics still have an appetite for hiring.
“Every new job is important, but America is still missing millions of jobs that would be back by now if the Obama “recovery” had been a normal recovery”, House Committee on Ways and Means Chairmen Kevin Brady said in a statement.
Revisions showed employers added 2,000 fewer jobs in November and December than previously estimated. Restaurants kept up their brisk level of hiring, increasing payrolls by 47,000. But economists surveyed by CNN projected that the economy would create 197,000 new jobs, which sounds high but is actually down from jobs added in December. This contributed to the unemployment rate being stable at 4.9 percent. “I think you know, some pullback was expected after a very strong growth in jobs in the fourth quarter”.
For all of 2015, the trade gap in goods and services widened 4.6 percent from a year ago to $531.5 billion (477.3 billion euros) as the fall in exports outpaced the decline in imports, the Commerce Department said. In January, employment gains were likely concentrated in the services sector, with mining probably losing more jobs and manufacturing reversing some of December’s gains. Still, temp jobs were up 2.89% year over year, although the growth rate has trended down. A rate hike increases the cost of borrowing, which drags on corporate earnings.
“Indeed, the irony is that by waiting so long to begin normalizing rates, the Fed has allowed the economic cycle to crest as it headed into the rate-hiking cycle, which will present a dilemma for the central bank”, Rieder said. “However, we feel today’s report offers little clue about near-term Fed actions, nor does it alter our expectation for only modest increases in mortgage rates during 2016, which is a positive for a housing market challenged by affordability constraints”. In that time-frame, foreign-born people in the US gained 4 million jobs and native-born Americans gained 4.6 million jobs. And temporary help services, often a harbinger of future hiring, shrunk by more than 25,000 posts. Also well below the 283,000 per month average rate of job creation for the last quarter of 2015. And those higher wages may be drawing more people to look for jobs: Labor force participation ticked up for the second month in a row.
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The robust growth exhibited over the last half year was not present in the Bureau of Labor Statistics’ (BLS) latest jobs report, leading some observers to predict the economy is in a cooling off period.
