By Lucia Mutikani
WASHINGTON (Reuters) – U.S. job growth surged more than expected in January as construction firms and retailers ramped up hiring, which likely gives the Trump administration a head start as it seeks to boost the economy and employment.
Nonfarm payrolls increased by 227,000 jobs last month, the largest gain in four months, the Labor Department said on Friday. But the unemployment rate rose one-tenth of a percentage point to 4.8 percent and wages increased modestly, suggesting that there was still some slack in the labor market.
Revisions to November and December showed the economy created 39,000 fewer jobs than previously reported. Still, the labor market continues to tighten, which could soon spur a faster pace of wage growth. Federal Reserve officials view the labor market as being at or near full employment.
Economists polled by Reuters had forecast payrolls rising 175,000 last month and the unemployment rate unchanged at 4.7 percent.
President Donald Trump vowed during last year’s election campaign to deliver 4 percent annual gross domestic product growth, largely on the back of a plan to cut taxes, reduce regulations, increase infrastructure spending and renegotiate trade deals in the United States’ favor.
Although details on the policy proposals remain sketchy, consumer and business confidence have surged in the wake of Trump’s election victory last November. But with the economy near full employment, some economists are skeptical of the 4 percent growth pledge. Annual GDP growth has not exceeded 2.6 percent since the 2007-08 recession.
DISAPPOINTING WAGE GROWTH
Average hourly earnings increased only three cents or 0.1 percent last month. December’s wage gain was revised down to 0.2 percent from the previously reported 0.4 percent increase.
January’s small rise in average hourly earnings is a surprise given that the minimum wage took effect in more than a dozen states last month. The small gain lowered the year-on-year increase in earnings to 2.5 percent from 2.8 percent in December.
Sluggish wage growth, if it persists, would suggest only a gradual pace of rate increases by the Fed. The U.S. central bank, which hiked rates in December, has forecast three rate increases this year.
On Wednesday, the Fed kept its benchmark overnight interest rate unchanged in a range of 0.50 percent to 0.75 percent. It said it expected labor market conditions would strengthen “somewhat further.”
With its January employment report, the government published its annual “benchmark” revisions and updated the formulas it uses to smooth the data for regular seasonal fluctuations. It also incorporated new population estimates.
The government said the level of employment in March of last year was 60,000 lower than it had reported. As the labor market nears full employment, the pool of workers is shrinking, which is slowing job growth.
The shift in population controls mean figures on the labor force or number of employed or unemployed in January are not directly comparable with December.
The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, was at 62.9 percent in January, the highest level since September.
All sectors of the economy added jobs in January.
Manufacturing payrolls increased by 5,000 jobs, rising for a second straight month as the oil-related drag on the sector eases. Construction employment jumped 36,000, the largest increase since March, likely boosted by warm weather, after December’s paltry 2,000 gain.
Retail payrolls, surprisingly surged 45,900, the biggest rise since February. Retailers, including Macy’s <M.N>, Sears <SHLD.O>, American Apparel and Abercrombie & Fitch <ANF.N> announced job cuts in January amid store closures. Department store sales are being undercut by online retailers, led by Amazon.com <AMZN.O>.
Government employment fell for a fourth straight month in January. Further declines are likely after the Trump administration enforced a hiring freeze on civilian federal government workers on Jan. 22.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
