January 2018 Nonfarm payrolls Recap

2 3

The pace of job creation in the United States remained strong in the January 2018 Nonfarm payrolls report, as the U.S. unemployment rate hovered near a 17 year low, amid a pickup in wage growth. The jobs data underlined the fact that the U.S. economy finished the first year of the month at a healthy pace with the labor market continuing to tighten.

Data from the U.S. Bureau of Labor Statistics showed that the January 2018 Nonfarm payrolls rose to a seasonally adjusted 200,000 in January. This was higher than the estimates of 181k. Revisions to the previous month saw the job numbers being revised from 148k to 161k.

However, for the months of November and December, hiring was revised down by a net 24,000, while the job creation averaged 192k over the previous three months. This was higher than the average of 181,000 during 2017.

The unemployment rate held steady for the fourth consecutive month at a 17 year low. Wage growth, which has been sluggish, also showed signs of life as wages accelerated 0.3% on the month, beating estimates of 0.2% increase.

December’s wage growth was also revised higher from 0.3% to 0.4%. This brought the total annual wage growth to a rate of 2.9% compared to the past year. It marked a new milestone as wage growth was the strongest since June 2009.

The January 2018 Nonfarm payrolls increase was the 88th consecutive month of job creation and marks the longest streak of continuous job creation on record. This comes despite the pace of the overall economy was slower compared to historical levels.

Manufacturing sector was also seen contributing to the job growth with mining and construction sectors being the fastest growing as far as job creation was concerned. Most of the jobs from the industries showed a combined 196k gain while only 4000 new jobs were created in the government sector.

January 2018 Nonfarm payrolls data was solid including the labor force participation rate. The rate held steady at 62.7%, unchanged from December.

Another measure of unemployment and underemployment also ticked higher to 8.2% in January. The measure includes those who are working part time jobs as they couldn’t find a full time job.

With the jobs report coming out stronger, the data renewed optimism that the U.S. economy started the year on a strong note. Recent data included the quarterly GDP data which show that the U.S. economy expanded at a pace of 2.5% in the three months ending December 2017, compared to a year ago.

This was slightly below estimates and slower than the growth registered in the third quarter. However, economists are hopeful that the tax cuts and the general optimism could potentially support growth further in the coming months.

The biggest winner from the jobs report was the wage growth, which has remained stubbornly low. The Fed officials look at the wage data as a key component when it comes to inflation which has also remained well below the Fed 2.0% inflation target rate.

With the December’s wage growth revision and the January wage growth rising better than expected, this could potentially trigger price pressures.

At the Fed meeting last week, the FOMC officials held rates steady but remained optimistic that inflation will rise closer to the Fed’s target rate in the near term. This was considered to be a hawkish statement with the markets starting to price in three rate hikes this year.

Consumer prices were seen rising 1.7% on the year in December while the core consumer prices rose 1.5% excluding food and energy.

The better than expected data is likely to also raise the case for a fourth rate hike this year if the economy continues to move at the current pace.

 

 

START TRADING

or practice on DEMO ACCOUNT

Trading CFDs Involves high risk of loss