Job growth surges; unemployment rate rises to 4.0 percent

A worker inspects the rear end of a General Motors Chevrolet Cruze at Jamestown Industries in Youngstown Ohio

A worker inspects the rear end of a General Motors Chevrolet Cruze at Jamestown Industries in Youngstown Ohio

The U.S. economy gained jobs for the 100th straight month, adding 304,000 jobs in January.

Spurred by an increasingly tight labor market, average wages continue to rise, gaining 3 cents per hour. Average earnings for all workers grew slightly slower than the month before, at 3.2 percent year-over-year.

While the new jobs report was higher than expected, the jobs report for December was adjusted down by 70,000 jobs from 312,000 jobs created that month to 222,000.

Wage growth held steady in January. Another issue to consider was that the ADP payrolls report had sort of tipped the hat to predict big jobs gains in January. Job creation has been a particularly strong suit for the economy. Wages have risen by 3.2 percent since this time past year. The central bank, which raised rates four times past year, did not raise rates and cited "global economic and financial developments" and low US inflation as reasons to be patient before changing rates again.

Hundreds of thousands of government workers were either left idle for most of the month or required to work without pay. Job growth was boosted by hiring at construction sites, retailers and business services as well as at restaurants and hotels.

"The Fed chickened out on further rate hikes this year and boy are they ever misreading the tea leaves on where the economy is going next", said Chris Rupkey, chief economist at MUFG in NY.

The current economic recovery is now only five months away from becoming the longest expansion ever, a record set in the 1990s, when the economy went 120 months in between recessions, as defined by the National Bureau of Economic Research. It's the second month the unemployment rate has increased, but economists say it's for the right reason: More people are coming off the sidelines and looking for work. This is the fastest rate of wage increases in almost a decade. And that one counted furloughed workers as employed, even if they were sitting at home and not collecting a paycheck. This typically means that the report is released on the first Friday after the reference month - so today's release will reflect preliminary employment data for the month of January.

While the month-long government shutdown didn't greatly affect jobs numbers, there was a slight impact. Leisure and hospitality led, adding 74,000 jobs while construction added 52,000.

Manufacturing payrolls increased by 13,000, slowing from December's 20,000 increase.

Retail jobs, however, have stayed essentially flat over the past year as e-commerce - usually represented in the transportation and warehousing category - has taken over an increasing share of employment in the sector. And this latest data doesn't actually change the monthly average very much.

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