Tag Archives: Unemployment Rate

Fed raises interest rates, signals more hikes ahead

A screen displays the headlines that the U.S. Federal Reserve raised interest rates as a trader works at a post on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 19, 2018. REUTERS/Brendan McDermid

By Ann Saphir and Howard Schneider

WASHINGTON (Reuters) – After weeks of market volatility and calls by President Donald Trump for the Federal Reserve to stop raising interest rates, the U.S. central bank instead did it again, and stuck by a plan to keep withdrawing support from an economy it views as strong.

U.S. stocks and bond yields fell hard. With the Fed signaling “some further gradual” rate hikes and no break from cutting its massive bond portfolio, traders fretted that policymakers could choke off economic growth.

“Maybe they have already committed their policy error,” said Fritz Folts, chief investment strategist at 3Edge Asset Management. “We would be in the camp that they have already raised rates too much.”

Interest rate futures show traders are currently betting the Fed won’t raise rates at all next year.

Wednesday’s rate increase, the fourth of the year, pushed the central bank’s key overnight lending rate to a range of 2.25 percent to 2.50 percent.

In a news conference after the release of the policy statement, Fed Chairman Jerome Powell said the central bank would continue trimming its balance sheet by $50 billion each month, and left open the possibility that continued strong data could force it to raise rates to the point where they start to brake the economy’s momentum.

Powell did bow to what he called recent “softening” in global growth, tighter financial conditions, and expectations the U.S. economy will slow next year, and said that with inflation expected to remain a touch below the Fed’s 2 percent target next year, policymakers can be “patient.”

Fresh economic forecasts showed officials at the median now see only two more rate hikes next year compared to the three projected in September.

But another message was clear in the statement issued after the Fed’s last policy meeting of the year as well as in Powell’s comments: The U.S. economy continues to perform well and no longer needs the Fed’s support either through lower-than-normal interest rates or by maintaining of a massive balance sheet.

“Policy does not need to be accommodative,” he said.

In its statement, the Fed said risks to the economy were “roughly balanced” but that it would “continue to monitor global economic and financial developments and assess their implications for the economic outlook.”

The Fed also made a widely expected technical adjustment, raising the rate it pays on banks’ excess reserves by just 20 basis points to give it better control over the policy rate and keep it within the targeted range.

Federal Reserve Board Chairman Jerome Powell arrives at his news conference after a Federal Open Market Committee meeting in Washington, U.S., December 19, 2018. REUTERS/Yuri Gripas

Federal Reserve Board Chairman Jerome Powell arrives at his news conference after a Federal Open Market Committee meeting in Washington, U.S., December 19, 2018. REUTERS/Yuri Gripas

CHOPPY WATERS

The decision to raise borrowing costs again is likely to anger Trump, who has repeatedly attacked the central bank’s tightening this year as damaging to the economy.

The Fed has been raising rates to reduce the boost that monetary policy gives to the economy, which is growing faster than what central bank policymakers view as a sustainable rate.

There are worries, however, that the economy could enter choppy waters next year as the fiscal boost from the Trump administration’s spending and $1.5 trillion tax cut package fades and the global economy slows.

“I think that markets were looking for more in terms of the pause,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia.

“It’s not as dovish as expected, but I do believe the Fed will ultimately back off even further as we move into the new year.”

The benchmark S&P 500 index <.SPX> tumbled to a 15-month low, extending a streak of volatility that has dogged the market since late September. The index is down nearly 15 percent from its record high.

Benchmark 10-year Treasury yields fell as low as 2.75 percent, the lowest since April 4.

ECONOMIC PROJECTIONS

Fed policymakers’ median forecast puts the federal funds rate at 3.1 percent at the end of 2020 and 2021, according to the projections.

That would leave borrowing costs just above policymakers’ newly downgraded median view of a 2.8 percent neutral rate that neither brakes nor boosts a healthy economy, but still within the 2.5 percent to 3.5 percent range of Fed estimates for that rate.

Powell parried three questions about whether the Fed intended to restrict the economy with its rate policy, but gave little away.

“There would be circumstances in which it would be appropriate for us to go past neutral, and there would be circumstances in which it would be wholly inappropriate to do so.”

Gross domestic product is forecast to grow 2.3 percent next year and 2.0 percent in 2020, slightly weaker than the Fed previously anticipated. The unemployment rate, currently at a 49-year low of 3.7 percent, is expected to fall to 3.5 percent next year and rise slightly in 2020 and 2021.

Inflation, which hit the central bank’s 2 percent target this year, is expected to be 1.9 percent next year, a bit lower than the 2.0 percent forecast three months ago.

There were no dissents in the Fed’s policy decision.

(Reporting by Ann Saphir and Howard Schneider; Additional reporting by Lewis Krauskopf in New York; Editing by Paul Simao and Dan Burns)

U.S. economy gains 313,000 jobs in February; wage growth slows

Job seekers and recruiters gather at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth surged in February, recording its biggest increase in more than 1-1/2 years, but a slowdown in wage gains pointed to only a gradual increase in inflation this year.

Nonfarm payrolls jumped by 313,000 jobs last month, boosted by the largest rise in construction jobs since 2007, the Labor Department said on Friday. The payrolls gain was the biggest since July 2016 and triple the roughly 100,000 jobs the economy needs to create each month to keep up with growth in the working-age population.

The labor market is benefiting from strong domestic demand, an improvement in global growth as well as robust U.S. business sentiment following the Trump administration’s $1.5 trillion income tax cut package that come into effect in January.

Average hourly earnings edged up four cents, or 0.1 percent, to $26.75 in February, a slowdown from the 0.3 percent rise in January. That lowered the year-on-year increase in average hourly earnings to 2.6 percent from 2.8 percent in January.

The unemployment rate was unchanged at a 17-year low of 4.1 percent in February for a fifth straight month as 806,000 people entered the labor force in a sign of confidence in the job market. The average workweek rebounded to 34.5 hours after falling to 34.4 hours in January.

With Federal Reserve officials considering the labor market to be near or a little beyond full employment, the moderation in wage growth last month did little to change the view that the U.S. central bank will raise interest rates at its March 20-21 policy meeting.

Slow wage growth, however, could temper expectations the Fed will raise its rate forecast to four hikes this year from three. There is optimism that tightening labor market conditions will spur faster wage growth this year and pull inflation toward the Fed’s 2 percent target.

“While the employment gains unequivocally suggest underlying strength in the economy, wage gains remain muted enough for the Fed to continue with an only gradual normalization of the policy stance. Stock markets are reacting accordingly,” said Harm Bandholz, chief U.S. economist at UniCredit Bank in New York.

Speculation that the central bank would upgrade its rate projections was stoked by Fed Chairman Jerome Powell when he told lawmakers last week that “my personal outlook for the economy has strengthened since December.”

While Powell said there was no evidence of the economy overheating, he added “the thing we don’t want to have happen is to get behind the curve.”

Economists polled by Reuters had forecast payrolls rising by 200,000 jobs last month and the unemployment rate falling to 4.0 percent. Average hourly earnings had been expected to increase 0.2 percent in February.

Data for December and January was revised to show the economy adding 54,000 more jobs than previously reported.

U.S. stock indexes opened higher after the data while prices of U.S. Treasuries were trading lower. The dollar was largely unchanged against a basket of currencies.

CONSTRUCTION SHINES

Some companies like Starbucks Corp and FedEx Corp have said they would use some of their windfall from a tax cut package to boost workers’ salaries. Walmart announced an increase in entry-level wages for hourly employees at its U.S. stores effective in February.

The employment report suggested the economy remained strong despite weak consumer spending, home sales, industrial production and a wider trade deficit in January that prompted economists to lower their first-quarter growth estimates. Gross domestic product estimates for the January-March quarter are around a 2 percent annualized growth rate. The economy grew at a 2.5 percent pace in the fourth quarter.

The full impact of the tax cuts and a planned increase in government spending has yet to be felt, and a robust job market could heighten fears of the economy overheating.

“The economy is simply too strong,” said Chris Rupkey, chief economist at MUFG in New York. “There’s no reason whatsoever for the Federal Reserve to have a stimulative monetary policy at this stage of the business cycle.”

Economists expect the unemployment rate to fall to 3.5 percent this year. A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, was unchanged at 8.2 percent last month.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose three-tenths of a percentage point to a five-month high of 63.0 percent in February.

An even broader gauge of labor market health, the percentage of working-age Americans with a job, increased to 60.4 percent last month from 60.1 percent in January.

Employment gains were led by the construction sector, which added 61,000 jobs, the most since March 2007. Hiring at construction sites was likely boosted by unseasonably mild temperatures in February.

Manufacturing payrolls increased by 31,000 jobs, rising for a seventh straight month. The sector is being supported by strong domestic and international demand as well as a weaker dollar. Retail payrolls jumped by 50,300, the largest increase since February 2016.

The Labor Department said that was because on an unadjusted basis the sector hired fewer workers than usual for the holiday season and did not shed many jobs after the holidays. As a result, retail employment rose after the seasonal adjustment, the department said.

Government employment increased by 26,000 jobs last month, with hiring of teachers by local governments accounting for the bulk of the rise. There were also increases in payrolls for professional and business services, leisure and hospitality as well as healthcare and social assistance.

Financial sector payrolls increased by 28,000 last month, the most since October 2005.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao)

Dour U.S. Employment report casts doubts on FED rate hike

People enter the Nassau County Mega Job Fair at Nassau Veterans Memorial

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. economy created the fewest number of jobs in more than five years in May as employment in the manufacturing and construction sectors fell sharply, suggesting a deterioration in the labor market that could make it harder for the Federal Reserve to raise interest rates.

Nonfarm payrolls increased by only 38,000 jobs last month, the smallest gain since September 2010, the Labor Department said on Friday. Employment gains were also restrained by a month-long strike by Verizon workers, which depressed information sector payrolls by 34,000 jobs.

Underscoring the report’s weakness, employers hired 59,000 fewer workers in March and April than previously reported. While the unemployment rate fell three-tenths of a percentage point to 4.7 percent in May, the lowest since November 2007, that was in part due to people dropping out of the labor force.

“This unusual jobs report puts the Fed in a tricky position. Disappointing job creation numbers, including adverse revisions to prior monthly estimates, argue for the Fed to remain highly accommodative for now,” said Mohamed el-Erian, chief economic adviser at Allianz in Newport Beach, California.

U.S. stock index futures dropped after the data, while prices for U.S. government debt rose. Short-term interest rate futures jumped. The dollarDXY was trading lower against a basket of currencies.

The Fed bank has signaled its intention to raise rates soon if job gains continued and economic data remained consistent with a pickup in growth in the second quarter.

Fed Chair Yellen said last week that a rate increase would probably be appropriate in the “coming months,” if those conditions were met. The U.S. central bank hiked its benchmark overnight interest rate in December for the first time in nearly a decade.

WEAK REPORT

The weak employment report bucks data on consumer spending, industrial production, goods exports and housing that have suggested the economy is gathering speed after growth slowed to a 0.8 percent annualized rate in the first quarter.

Economists polled by Reuters had forecast payrolls rising 164,000 in May and the unemployment rate falling to 4.9 percent.

The goods producing sector, which includes mining, manufacturing and construction, shed 36,000 jobs, the most since February 2010. Even without the Verizon strike, payrolls would have increased by a mere 72,000.

The Verizon workers, who were considered unemployed because they did not receive a salary during the payrolls survey week, returned to their jobs on Wednesday. They are expected to boost June employment.

Other details of the employment report were less encouraging. Average hourly earnings rose five cents, or 0.2 percent. That kept the year-on-year rise at 2.5 percent.

Economists say wage growth of between 3.0 percent and 3.5 percent is needed to lift inflation to the Fed’s 2.0 percent target. There are, however, signs that inflation is creeping higher as the dampening effects of the dollar’s past rally and the oil price plunge dissipate.

A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment held steady at 9.7 percent in May.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell 0.2 percentage point to 62.6 percent.

The job gains in May were broadly weak, with the private sector adding only 25,000 jobs, the smallest since February 2010. Manufacturing employment fell by 10,000 jobs and construction payrolls dropped 15,000.

Mining employment maintained its downward trend, shedding 10,000 positions. Mining payrolls have dropped by 207,000 since peaking in September 2014, with three-quarters of the losses in support activities.

Retail payrolls rose 11,400 after shedding jobs in April for the first time since December 2014. Wholesale trade employment fell by 10,300 jobs. Temporary help jobs dropped 21,000. There were declines in utilities and transportation and warehousing employment. Government payrolls increased 13,000.

(Reporting by Lucia Mutikani; Additional reporting by Jennifer Ablan in New York; Editing by Paul Simao)

U.S. jobless claims rise to more than one-year high

Job Seekers at Colorado Hospital Job Fair

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits unexpectedly rose last week, touching the highest level in more than a year, which could raise concerns about labor market health in the wake of the slowdown in job gains in April.

Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 294,000 for the week ended May 7, the highest level since late February 2015, the Labor Department said on Thursday.

Claims for the prior week were unrevised. Economists polled by Reuters had forecast initial claims slipping to 270,000 in the latest week.

Despite last week’s jump, claims remained below 300,000, a threshold associated with healthy job market conditions, for 62 consecutive weeks, the longest stretch since 1973.

A Labor Department analyst said there were no special factors influencing last week’s claims data and no states had been estimated. There was a surge in claims in New York and Michigan in the latest week.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, increased 10,250 to 268,250 last week, the highest level in almost three months.

The claims report came on the heels of data last week showing nonfarm payrolls increased only 160,000 in April, the smallest gain in seven months, after advancing by 208,000 in March.

The labor market has been fairly robust despite a sharp slowdown in economic growth in the first quarter. The spike in jobless claims and moderation in employment gains likely do not suggest a deterioration given difficulties adjusting the data for seasonal fluctuations.

A report on Tuesday showed job openings hit an eight-month high in March, with the rate re-testing its post-recession high.

Thursday’s claims report showed the number of people still receiving benefits after an initial week of aid rose 37,000 to 2.16 million in the week ended April 30.

The four-week average of the so-called continuing claims fell 3,750 to 2.14 million, the lowest reading since November 2000.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. payrolls surge, bolster Fed rate hike prospects

WASHINGTON (Reuters) – U.S. employment gains surged in February, the clearest sign yet of labor market strength that could further ease fears the economy was heading into recession and allow the Federal Reserve to gradually raise interest rates this year.

Nonfarm payrolls increased by 242,000 jobs last month and 30,000 more jobs were added in December and January than previously reported, the Labor Department said on Friday. The unemployment rate held at an eight-year low of 4.9 percent even as more people piled into the labor market.

“Despite panic on Wall Street about impending recession, Main Street goes about its business as usual. This report will get the Fed’s attention, and raises the odds of another rate hike before too long,” said Scott Anderson, chief economist at Bank of the West in San Francisco.

The only blemish in the report was a three-cent drop in average hourly earnings, which in part reflected a calendar quirk and the proliferation of low-paying retail and restaurant jobs. The average length of the workweek also fell last month.

The employment report added to data such as consumer and business spending in suggesting the economy had regained momentum after growth slowed to a 1.0 percent annual rate in the fourth quarter.

Growth estimates for the first quarter are around a 2.5 percent rate, but risks are tilted to the downside after a report from the Commerce Department on Friday showed the trade deficit widened 2.2 percent to $45.7 billion in January.

Economists had forecast employment increasing by 190,000 last month and the jobless rate holding steady.

U.S. stocks were trading higher on the data, while prices for U.S. Treasury debt fell. The dollar slipped against a basket of currencies on concerns about wage growth.

Fears of recession in the wake of poor economic reports in December and slowing growth in China sparked a global stock market rout at the start of the year, causing financial market conditions to tighten.

Though financial markets have priced out bets of a rate hike at the Fed’s March 15-16 policy meeting, they now see a roughly 50 percent chance of an increase at the September and November meetings, according to CME FedWatch.

But economists believe the strong job market and improved growth outlook, together with signs that inflation is creeping up, could prompt the U.S. central bank to lift borrowing costs in June.

The Fed raised its key overnight interest rate in December for the first time in nearly a decade.

“The lack of a more marked pickup in wage growth is the only missing element,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto. “But as far as the Fed is concerned, it is already seeing a clear acceleration in core price inflation. A June rate hike is coming.”

EYE ON WAGES

Average hourly earnings dipped 0.1 percent in February, the first drop since December 2014, after spiking 0.5 percent in January. That lowered the year-on-year earnings gain to 2.2 percent from 2.5 percent in January.

The average workweek fell to a two-year low of 34.4 hours last month from 34.6 hours in January, but economists cautioned that the series tended to be volatile.

“If labor demand was really about to fall, why was there such a sharp rise in employment?” said Harm Bandholz, chief U.S. economist at UniCredit in New York.

With labor market slack being absorbed, wage growth is expected to accelerate.

A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell two-tenths of a percentage point to 9.7 percent, the lowest level since May 2008.

Fed 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.

Also adding to the strong tone of the jobs report, the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, increased two-tenths of a percentage point to 62.9 percent, the highest level in just over a year. The employment-to-population ratio hit its highest level since April 2009.

Job gains were almost broad-based in February, though manufacturing and mining employment fell. The services sector created 245,000 jobs after adding 153,000 jobs in January.

Mining shed a further 18,000 jobs after losing 9,000 positions in January. Mining payrolls have declined by 171,000 jobs since peaking in September 2014, with three-fourths of the losses in support activities.

More losses are likely after oilfield services provider Halliburton Co <HAL.N> said last month it would cut a further 5,000 jobs because of a prolonged slump in oil prices.

Manufacturing lost 16,000 jobs, reversing some of January’s surprise increase. Private education jobs rebounded after plunging in January. Construction payrolls increased 19,000 and government added 12,000 jobs.

Retail payrolls increased 54,900, adding to the 62,100 positions created in January. Leisure and hospitality jobs rose 48,000, with employment at restaurants and bars increasing by 40,200.

(Reporting by Lucia Mutikani; Editing by Clive McKeef and Paul Simao)

U.S. data flow suggests economy regaining steam

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits unexpectedly rose last week, but the underlying trend continued to point to a strengthening labor market.

The labor market optimism was, however, dimmed somewhat by a survey on Thursday showing employment in the services industries fell in February for the first time in two years, even as the overall sector continued to expand.

But economists cautioned against reading too much into the drop, noting that past declines had not translated into overall labor market weakness.

“At first glance that is a concern … but we’ve seen this happen with the employment index before. There are also no other signs that service sector hiring is slowing,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

Initial claims for state unemployment benefits increased 6,000 to a seasonally adjusted 278,000 for the week ended Feb.27, the Labor Department said. Economists had forecast claims slipping to 271,000 in the latest week.

Claims have now been below the 300,000 threshold, which is associated with healthy labor market conditions, for a year. That is the longest period since the early 1970s. The four-week moving average of claims, seen as a bettermeasure of labor market trends, fell to the lowest level since late November – indicating no stress in the jobs market despite financial market conditions having tightened after fears of recession sparked a global stock market sell-off.

“Through some of the ups and downs in the weekly series, it looks like the trend in initial claims has improved over the past month, signaling that the labor market continues to improve despite weakness in several other recent economic reports,” said Daniel Silver, an economist at JPMorgan in New York.

The labor market’s resilience was reinforced by another report from global outplacement consultancy Challenger, Gray & Christmas Inc showing announced layoffs by U.S. companies tumbled 18 percent to 61,599 in February.

In a separate report, the Institute for Supply Management said its index of services industries employment fell 2.4 percentage points to a reading of 49.7 percent, dropping below the 50 threshold for the first since February 2014.

That contributed to the ISM’s nonmanufacturing index dipping 0.1 percentage point to a reading of 53.4 last month. A reading above 50 indicates expansion in the U.S. services sector, which accounts for more than two-thirds of the economy.

STRONG PAYROLLS EXPECTED

While the weak employment reading poses a risk to Friday’s jobs report for February, another survey from data firm Markit showed services industry employment held firm in February, though its overall services sector index fell to a near two-and-half year low, in part because of a blizzard that slammed the Northeast.

A report on Wednesday showed strong private sector hiring last month. According to a Reuters survey of economists, nonfarm payrolls likely increased by 190,000 jobs last month after rising 151,000 in January. The unemployment rate is seen steady at an eight-year low of 4.9 percent.

The dollar fell against a basket of currencies and U.S. stocks were trading modestly lower, also reflecting weaker oil prices. U.S. government debt rose marginally.

The encouraging labor market data joins reports on manufacturing and consumer spending in suggesting economic growth picked up at the start of the year after slowing to an annual rate of 1.0 percent in the fourth quarter.

In a fourth report, the Commerce Department said new orders for manufactured goods rebounded 1.6 percent after dropping 2.9 percent in December. That was the largest increase since June and followed two straight months of declines.

“It should be clear to most that the recession fears were overblown,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The increase in factory orders was the latest suggestion that the worst of the factory slump was likely over.

Factory activity, which accounts for about 12 percent of the economy, has been slammed by a strong dollar and weak global demand, which have undercut exports. Spending cuts by energy firms in the wake of a plunge in oil prices are also a drag, as are efforts by businesses to reduce an inventory glut.

In another report, the Labor Department said nonfarm productivity fell at a 2.2 percent rate in the fourth quarter and not the 3.0 percent pace it reported last month. Still, labor-related costs increased solidly as companies employed more workers to raise output.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. unemployment rate hits eight-year low

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

Non-farm payrolls increased by 151,000 jobs and the unemployment rate slipped one-tenth of a percentage point to 4.9 percent, the lowest since February 2008, the Labor Department said on Friday. The payrolls gain was a sharp step-down from the average 231,000 jobs per month during the fourth quarter.

“The fact that payroll gains fell back to earth is not necessarily a bad sign. Most indications are that the job market in the U.S. is on solid footing and improving,” said Nariman Behravesh, chief economist at IHS in Lexington, Massachusetts.

Economists had forecast employment increasing by 190,000 in January and the jobless rate steady at 5 percent. The economy added 2,000 fewer jobs in November and December than previously reported.

On top of a 0.5 percent jump in average hourly earnings, which was the biggest gain in a year, 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.

Economists said the combination of strong wage growth and falling unemployment suggested a March interest rate increase from the Federal Reserve could not be completely ruled out.

The dollar rose against a basket of six major currencies on the data after hitting a roughly 15-week low on Thursday. Prices for U.S. government debt initially fell, but pared losses as stocks on Wall Street extended their decline.

“The lower unemployment rate and rising wages further support the view that the labor market is doing nothing but tightening,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “Clearly, there are more uncertainties today than when the Fed raised rates in December and hinted that there could be four increases this year. But the labor market is absolutely not one of them.”

Tightening financial market conditions and signs that both the domestic and global economies were slowing had undercut the case for a Fed rate hike next month and lowered the probability of monetary policy tightening this year.

The U.S. central bank raised its short-term interest rate in December for the first time in nearly a decade.

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.

The economy, especially voters’ perceptions of their job prospects, will likely be an issue in the November elections. President Barack Obama lauded the labor market progress.

“This progress is finally starting to translate into bigger paychecks. The United States of America right now has the strongest, most durable economy in the world,” Obama told reporters at the White House.

Republican National Committee chairman Reince Priebus, however, said the economy was “still failing the millions of Americans who have given up looking for work.”

WEATHER PAYBACK

January’s softer job gains were 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.

The economy grew at a 0.7 percent annual rate in the fourth quarter, restrained by headwinds that included the strong dollar and efforts by businesses to sell off inventory.

A separate report from the Commerce Department showed the buoyant dollar cutting into exports in December, causing the trade deficit to widen 2.7 percent to $43.4 billion.

In January, the unemployment rate fell even as more people entered the labor force. The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job rose one-tenth of a percentage point to 62.7 percent. It remains near four-decade lows.

Low participation could crimp job growth as the supply of labor shrinks, unless a strong rise in wages lures more people back into the labor force. The private sector accounted for all employment gains in January, adding 158,000 positions.

The services sector created 118,000 jobs, the fewest in 10 months. That was because temporary help services fell 25,200 and courier and messenger employment declined by 14,400 jobs. Hiring in these categories normally rises during the holiday season.

Educational services lost 38,500 jobs, but retail payrolls added a strong 57,700 positions. Hiring could slow in the months ahead after a number of retailers, including Walmart <WMT.N> and Macy’s <M.N> announced dozens of store closures.

The embattled manufacturing sector surprisingly added 29,000 jobs last month, while mining laid off 7,000 more workers. 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 percent in the last 18 months, forcing firms like oilfield services provider Schlumberger <SLB.N> to slash their workforces.

Construction payrolls rose 18,000, cooling off after adding 146,000 jobs in the fourth quarter. Government employment fell 7,000.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Rising U.S. layoffs point to ebbing labor market momentum

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits rose more than expected last week, suggesting some loss of momentum in the labor market amid a sharp economic slowdown and stock market selloff.

Signs of creeping employment weakness were also flagged by another report on Thursday showing a 218 percent jump in announced job cuts by U.S.-based employers in January. The planned layoffs were concentrated in the energy and retail sectors.

“The future is somewhat darker … the labor market may be past its peak for this cycle. It looks like the labor market has scaled back its rapid advance last month,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

Initial claims for state unemployment benefits increased 8,000 to a seasonally adjusted 285,000 for the week ended Jan. 30, the Labor Department said.

Still, claims remained below 300,000, a level associated with strong labor market conditions, for the 48th straight week. That is the longest run since the early 1970s.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 2,000 to 284,750 last week. Economists had forecast claims rising to 280,000 in the latest week.

The rise in layoffs came amid a slowdown in economic growth. The economy grew at only a 0.7 percent annual pace in the fourth quarter, held back by the headwinds of a strong dollar and faltering global demand.

A downturn in capital spending by energy companies, reeling from a collapse in oil prices, and inventory destocking by businesses are also constraining growth. At the same time, a stock market rout sparked by fears of a global economic slump has caused financial market conditions to tighten.

In a separate report, global outplacement consultancy Challenger, Gray & Christmas said employers reported 75,114 planned job cuts last month, up from December’s 15-year low of 23,622. Last month’s planned layoffs were the largest since July.

Retailers announced plans to eliminate 22,246 jobs from their payrolls, the most since January 2009. The retail cuts were dominated by Walmart <WMT.N>, which announced plans to close 269 stores worldwide. The downtrodden energy sector announced plans to reduce its headcount by 20,246, up from 1,682 in December.

“It remains unclear how much of the deterioration in the data is related to an unfavorable shift in the weather and an increase in layoffs of temporary workers following the holiday season,” said Daniel Silver, an economist at JPMorgan in New York.

In a third report, the Commerce Department reported that new orders for manufactured goods fell 2.9 percent in December, the largest drop in a year, after falling 0.7 percent in November.

The reports came on the heels of weak data on export growth and consumer spending that suggest the Federal Reserve will probably not raise interest rates in March. The U.S. central bank raised its short-term interest rate in December for the first time in nearly a decade.

U.S. stock indexes rose, while prices for Treasuries were mixed. The dollar fell against a basket of currencies, touching a 15-week low against the euro and a two-week low against the yen.

PRODUCTIVITY WEAK

While the claims data has no bearing on January’s employment report, which is scheduled to be released on Friday, as it falls outside the survey period, it fits in with perceptions of a deceleration in the pace of job growth.

According to a Reuters survey of economists, nonfarm payrolls are expected to have increased 190,000 last month after surging by 292,000 in December. The unemployment rate is forecast holding steady at a 7-1/2-year low of 5 percent.

In another report on Thursday, the Labor Department said nonfarm productivity, which measures hourly output per worker, declined at a 3.0 percent rate, the biggest drop since the first quarter of 2014, after rising at a 2.1 percent rate in the third quarter.

The weak productivity data reflected the sharp slowdown in GDP growth during the quarter and an acceleration in the pace of hiring. Nonfarm payrolls rose by an average 284,000 jobs per month.

Productivity grew 0.6 percent in 2015, the smallest increase since 2013, and has increased at an annual rate of less than 1.0 percent in each of the last five years. Economists blame softer productivity on a lack of investment, which they say has led to an unprecedented decline in capital intensity.

In the fourth quarter, unit labor costs, the price of labor per single unit of output, advanced at a 4.5 percent pace, the fastest rate in a year. They rose 2.4 percent in 2015, the largest gain since 2007.

(Reporting by Lucia Mutikani; Editing by Paul Simao)