Better news than expected for January jobs

February 6, 2015 | Jeff Cox, NBR, CNBC.com

The unemployment rate edged higher but the U.S. economy added a better-than-expected 257,000 jobs in January, according to the latest data from the Bureau of Labor Statistics.

The number of new jobs created in January was expected to total 234,000, while the unemployment rate was seen coming in at 5.6 percent.

Full-time workers surged, gaining 777,000 and numbering more than 120 million for the first time since July 2008. Their wages grew as well, with hourly earnings up 12 cents an hour, representing an annualized gain of 2.2 percent and the largest monthly gain in the economic recovery.

It was only the second time in the last 11 years that January’s numbers beat Wall Street expectations and came amid a powerful run for nonfarm payrolls. Over the past three months, job creation has averaged 336,000, with upward revisions for both November and December, good for a total of just over one million during the span.

“It’s a great report. The labor force finally goes up, we got a little wage growth, a lot of upward revisions,” said Ed Keon, managing director and portfolio manager for Prudential Financial. “We’re finally getting enough internal momentum that we can stay at that roughly 3 percent (gross domestic product) growth rate, maybe even a little higher as we go through the year.”

Randall Hill | Reuters A worker installs brake cables at the Bicycle Corporation of America plant in Manning, South Carolina.

Randall Hill | Reuters
A worker installs brake cables at the Bicycle Corporation of America plant in Manning, South Carolina.

A broader measure of unemployment that includes workers who have stopped looking for jobs as well as the underemployed moved higher as well, from 11.2 percent in December to 11.3 percent in January. Those working part-time for economic reasons increased 20,000 during the month; part-time workers overall increased 40,000.

The gain in the rates likely was owing to a rise in the labor force participation rate, which had been mired at 36-year lows but improved from 62.7 percent to 62.9 percent.

December’s lower-than-expected 252,000 got pushed up to 329,000, while November’s surged from 353,000 to 423,000.

Gains came across the board, with retail leading the way in January with 46,000 new positions. Construction added 39,000, while health care grew 38,000.

The report could help ease some anxiety about the pace of growth, particularly in the wake of some mediocre economic reports to start the year.

“There are many concerns about global growth, concerns that have been exacerbated by the number of central banks cutting interest rates in January,” said Dan Greenhaus, chief strategist at BTIG. “However, today’s report is yet another which suggests the U.S. is weathering the storm and finds itself in very, very good shape.”

Stock futures moved higher following the report, as did government bond yields.

Investor attention now is likely to turn toward the Federal Reserve, which has maintained a zero-interest-rate policy despite the labor market improvements.

“The strength of employment growth suggests the Fed should drop its ‘patience’ language in March and start raising its policy rate by mid-year,” said Paul Ashworth, chief U.S. economist at Capital Economics.

Get the market reaction here.

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