Unemployment Rate Falls Below 5% as Job Growth Slows

February 5, 2016, 1:40 PM UTC
Pace Of Job Growth Slows Down, 7.8 Unemployment Rate Remains Unchanged
SAN RAFAEL, CA - JANUARY 04: A "now hiring" sign is posted in the window of a Chase bank branch on January 4, 2013 in San Rafael, California. According to a Labor Department December jobs report, the U.S. unemployment remained the same from November at 7.8% as employers added 155,000 jobs in December. (Photo by Justin Sullivan/Getty Images)
Photograph by Justin Sullivan—Getty Images

U.S. employment gains slowed more than expected in January as the boost to hiring from unseasonably mild weather faded, but surging wages and an unemployment rate at an eight-year low suggested the labor market recovery remains firm.

Nonfarm payrolls increased by 151,000 jobs last month and the unemployment rate was at 4.9%, the lowest since February 2008, the Labor Department said on Friday.

Data for November and December was revised to show 2,000 fewer jobs created than previously reported. Economists polled by Reuters had forecast employment increasing by 190,000 and the jobless rate steady at 5%.

Also taking the sting from the softer payrolls number, employers increased hours for workers. Manufacturing, which has been undermined by a strong dollar and weak global demand, added the most jobs since August 2013.

The sharp step-down in job gains from the fourth quarter’s brisk clip largely reflected payback after the warmest temperatures in years bolstered hiring in weather-sensitive sectors like construction. January employment also lost the lift from the hiring of couriers and messengers, which was buoyed in November and December by strong online holiday sales.

But coming in the wake of an abrupt slowdown in economic growth in the fourth quarter and a sharp stock market selloff, the closely watched employment report could add to concerns the U.S. economic outlook was deteriorating.

Federal Reserve Chair 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 further undercut the case for a Fed interest rate hike in March. The U.S. central bank raised its short-term interest rate in December for the first time in nearly a decade.

Full Employment

The economy grew at a 0.7% 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%. That left the year-on-year gain in earnings at 2.5% as the unusually strong wage gains seen in January 2014 dropped out of the picture.

But with the jobless rate in a range most economists associate with full employment, wage growth is expected to pick up this year.


In January, all the employment gains were in the private sector, which added 158,000 jobs. The services sector dominated the payrolls increase last month, with 118,000 jobs created.

Mining losing lost 7,000 more jobs, while the embattled manufacturing sector surprisingly added 29,000 positions.

Mining payrolls have decreased by 146,000 since peaking in September 2014. About three-fourths of the job losses over this period have been in support activities for mining.


Further losses are likely after a report on Thursday showed energy firms in January announced plans to lay off 20,246 workers. Oil prices have plunged about 70% in the last 18 months, forcing firms like oilfield services provider Schlumberger to slash their workforces.

Construction payrolls rose 18,000, cooling off after hefty gains in the fourth quarter. Courier services hiring fell 14,400. Retail employment added a strong 57,700 jobs after shedding 800 positions in December. But hiring could slow in the months ahead after a number of retailers, including Walmart and Macy’s announced dozens of store closures.

Temporary hiring fell 25,200 last month and government payrolls fell 7,000.

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