U.S. NFP: 227K Higher Than Expected But Wages Grew by Only 2.5%

The U.S. non-farm payroll came higher than expected in terms of job growth: 227K vs an expected growth of 170K (The ADP estimated a gain of 246K jobs) during January; conversely, wage growth was only 2.5% in annual terms – a disappointing figure compared to the wage growth recorded last month. Unemployment rate edged up to 4.8%. This recent report suggest there is still some more slack in the labor market, which means the Fed is less likely to raise rates anytime soon.    

The U6 unemployment measurement, a broader measure of unemployment, picked up last month to 9.4%. In terms of revisions, there was a total downward revision of 39K for December and November combined.

In January, the rate of U.S. unemployment was 0.1 percent points below the rate recorded in January 2015.

The number of unemployed persons (7.635 million) rose by 106K in January compared to the previous month. And the civilian labor force also increased by 76K. So there was a gain in number of people participating in the labor force and in the number of unemployed. In the end, the participation rate edged up to 62.9%.

nfp 2017

Finally, wages rose in January compared to December – the hourly earnings reached $26 per hour — a gain of 3 cent or 0.1%, month over month –lower than expected (exp. were for 0.3% gain); wages grew at an annual rate of 2.5%, year on year.

*(it should be noted that the BLS revised its survey data and to population estimates for the Household survey, which makes a comparison between Dec 2016 and Jan 2017 skewed)

Takeaway

The recent jobs report suggests there is more room for growth mainly when we look at the U6 and wage growth – two indicators that are still weaker than the numbers recorded pre-2008 crisis. But is this report just a one off? If the next report shows similar results, this could reaffirm that the Fed is more likely to keep rates unchanged in the coming months.

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