United States: Payroll growth slows at the outset of the year; unemployment rate falls to lowest level in nearly eight years

Non-farm payrolls grew by 151,000 in January, which was lower than December’s downward revised increase of 262,000 (previously reported: +292,000) and undershot the 190,000 increase the markets had expected. The result came in ahead of the release of the minutes of the January FOMC meeting, in which U.S. monetary authorities noted that labor market conditions had continued to improve despite weak GDP growth in Q4. The statement mirrors the conclusion of the FOMC statement in January.

The private sector continues to be mainly responsible for the bulk of hiring, having added 158,000 jobs in January, while the public sector shed 7,000 jobs. The slowdown in January can be also attributed to slowing payback from seasonal distortions, namely employment in couriers and messengers as well as in employment for workers in temporary help services.

The unemployment rate, which is derived from a different survey, dropped to 4.9% in January after three consecutive months of being stable at 5.0%. The unemployment rate is now at the lowest level in nearly eight years.

The unemployment rate is below the Fed’s target zone of 5.2%–5-5%, although the labor participation rate remains significantly low. Labor participation came in at 62.7% in January, which came in marginally above the 62.6% in December.

FocusEconomics Consensus Forecast panelists expect unemployment to average 4.8% in 2016, which is unchanged from last month’s forecast. For 2017, the panel expects the unemployment rate to drop to 4.5%.