Wages Rise as U.S. Unemployment Rate Falls Below 5%

[Leroy N. Soetoro]

http://www.nytimes.com/2016/02/06/business/economy/jobs-report-
unemployment-january-fed-interest-rates.html?_r=0

The American economy’s jobs machine cooled in January but still performed
well enough to push unemployment to an eight-year low and deliver some
much-needed wage gains for ordinary workers.

The Labor Department said Friday that payrolls rose by 151,000 in January,
a falloff from the year-end sprint that helped make 2015 the second-best
year for job creation since the late 1990s.

Analysts said that the slowdown might push the Federal Reserve to postpone
another interest rate increase when it meets next month, but signs of a
tighter labor market suggested that policy makers would be looking closely
at incoming data.

“We are likely to have to two rate hikes this year, probably in June and
December,” said Diane Swonk, an independent economist in Chicago, “but the
wage gains are important, so March can’t be ruled out.”

Given the big jump in payrolls late last year, as well as much colder
weather last month after the warmest December on record, some payback in
January was to be expected.

“The headline number was a bit of a disappointment but not too bad, and
the rest of the report suggests steady improvement,” said Michael Hanson,
a senior economist at Bank of America Merrill Lynch. “The financial
markets are leery, but the labor market still looks like it’s continuing
to grow.”

Investors have been edgy lately, concerned about weakness in China,
plunging oil prices and a series of reports suggesting that the American
economy may have hit an air pocket in recent weeks.

The latest figures on the job market — plus a slight fall in the
unemployment rate to 4.9 percent, from 5 percent in December — suggest
that some modest strength persists. January was the first time since
February 2008 that the unemployment rate fell below 5 percent, just before
the collapse of Bear Stearns set the stage for the financial crisis.

To be sure, markets are mercurial, foreseeing recessions that never come
to pass and assuming the good times will go on right up until the music
stops.

“We don’t think the economy is sliding into a recession,” said Michael
Gapen, chief United States economist at Barclays. “We do think the
unemployment rate will continue to drift lower and that will support wage
growth.”

Last month, average hourly earnings rose 0.5 percent, leaving wages up 2.5
percent over the last 12 months. That was the best showing since January
2015, and it suggested some of the benefits from the falling unemployment
rate were beginning to flow to ordinary workers.

For all the concerns about growth in 2016, the Main Street economy appears
to be on a fairly solid footing.

Since the beginning of 2010, the American economy has gained nearly 14
million jobs, with healthy increases more recently in better-paying
sectors like professional and business services as well as construction.
Even as employers had been hiring at a healthy pace, they were only
sparingly handing out substantial raises.

All of these crosscurrents — steady hiring but anxious markets, falling
unemployment but flat wages — underscore the delicate task now facing the
Fed.

The central bank raised short-term interest rates in December, confident
that the economy could withstand the impact of a quarter-point tightening
in monetary policy after almost a decade of near-zero rates.

But the sell-off in global stock markets, as well as disappointing retail
sales and a gloomier trade balance, has prompted some experts to conclude
that the Fed won’t move imminently.

Ms. Swonk said the report for January has ammunition for Fed officials who
favor a rate-tightening sooner rather than later, as well as those who are
more dovish. The jump in average hourly earnings last month might be
evidence that wage pressures are building, ultimately setting off more
inflation, while the slowdown in payroll growth is an indicator that the
economy is nowhere near overheating.

The overall picture in Friday’s report obscures spots of real strength,
along with some real pain.

In a reversal after weakness in the second half of 2015, the manufacturing
sector surged last month, adding 29,000 jobs. The strong dollar and weak
export markets in Asia and Europe had hurt factory employment, but some
experts suggested that the worst may now be over.

“It’s a sign the manufacturing sector may be stabilizing,” said Scott
Anderson, chief economist at Bank of the West in San Francisco. While the
factory sector in the United States is not nearly the size it once was, it
is an important creator of better-paying jobs for less-educated workers
who have fared poorly in the recovery.

The construction industry, another source of higher-paying jobs for blue-
collar workers, also held up well, adding 18,000 jobs, despite colder
weather, which can hold up new building.

The biggest surprise, Mr. Anderson said, was that after months of
strength, the service sector faded, highlighted by a 38,500 drop in
education services.

The overall figures for job creation, as well as the sector-by-sector
data, are likely to be revised in future months as more data comes in. On
Friday, the big job gain in December was revised downward by the Labor
Department, while November’s payroll data was revised upward, reducing
payrolls by 2,000 for the final two months of 2015.

The three-month trend in job creation, which economists tend to regard as
more meaningful because it smoothes out the month-to-month fluctuations,
stands at 231,000, which is more than enough to keep the unemployment rate
moving lower.

The proportion of Americans who are in the labor force, which has been
stuck at lows not seen since the late 1970s, ticked up slightly in
January.

As has been the case since the current recovery began in mid-2009, the
most-educated workers are doing best in today’s job market: The
unemployment rate for college graduates was unchanged in January at 2.5
percent, while joblessness ticked upward to 7.4 percent for people without
a high school diploma.

For the winners, especially in parts of the country where unemployment is
very low, Wall Street’s nervousness seems misplaced.

“It’s a very tight labor market, and we continue to hire,” said Dave
Rozenboom, president of First Premier Bank in Sioux Falls, S.D. “The
economy is as strong as it has ever been here.”

With a state unemployment rate of 2.9 percent in late 2015, employers are
feeling pressure to increase wages to attract and retain workers, he said.

Starting salaries for workers who handle credit card customer service and
collections recently went to $13 an hour from $11.75, Mr. Rozenboom said.
Hospitals and construction firms in the region are also hiring.

Sioux Falls’s situation may be unusually strong, but the upward trajectory
in employment over all in the United States suggests to some analysts that
the owners of smaller businesses know something that the Wall Street
pessimists don’t.

“We think the recession talk is overdone and that labor markets are the
primary signal that suggests the economy is healthier than people think,”
Mr. Gapen of Barclays said. “There is weakness in places tied to energy
and in the industrial Midwest, but it’s not widespread and doesn’t suggest
there is a more systemic problem.”



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Obama increased total debt from $10 trillion to $19 trillion in the six
years he has been in office, and sold out heterosexuals for Hollywood
queer liberal democrat donors.

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Loretta Fuddy, killed after she "verified" Obama's phony birth
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Nancy Pelosi, Democrat criminal, accessory before and after the fact to
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Obama ignored the brutal killing of an American diplomat in Benghazi, then
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Obama continues his muslim goal of disarming America while ObamaCare
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