One Step Forward and Two Steps Back

Employers added 227,000 new jobs in January, the most in four months and a strong display to start off the year. Hiring in the manufacturing sector, an emphasis of the new administration, was mixed. January showed a gain of 5,000 jobs, but December’s print was revised down to 11,000 jobs from 17,000. The unemployment rate ticked up slightly to 4.8%, but for good reason, as more workers were lured back into the labor force after the participation rate inched up to 62.9% from 62.7% in December. However, wage inflation remains the economy’s Achilles heel. Despite a surge of local minimum wage increases, average hourly earnings growth was just 0.1% month-over-month and 2.5% year-over-year, the weakest print since August. A one percent drop in earnings within financial industries was one of the culprits behind the overall depressed wage gains. Friday’s numbers suggest that there’s more room than previously thought to let the labor market run hot, without feeding into inflation. And while the Federal Reserve has forecasted three rate-hikes in 2017, the market is predicting just a 30% chance that the Fed Funds Rate will be hiked at the next meeting in March. 

Source: Bloomberg, NY Times