Bloomberg Business

Victoria Stilwell
February 5, 2016 — 5:30 AM PST
Updated on February 5, 2016 — 7:16 AM PST

Job growth settled into a more sustainable pace in January and the unemployment rate dropped to an almost eight-year low of 4.9 percent, signs of a resilient labor market that’s causing wage growth to stir.

The 151,000 advance in payrolls, while less than forecast, largely reflected payback for a seasonal hiring pickup in the final two months of 2015, Labor Department figures showed Friday. The jobless rate fell to the lowest level since February 2008. Hourly earnings rose more than estimated after climbing in the year to December by the most since July 2009.

The moderation in hiring still leaves the job market on solid footing and shows companies are confident about the outlook for domestic sales. A further tightening of labor conditions that sparks wage gains would help assure Federal Reserve policy makers that inflation will reach its goal.

“This is a very encouraging report — the fact that wages rose is very important, the unemployment rate continues to go lower, and job growth at 151,000 is still a good number,” said Kathy Bostjancic, an economist at Oxford Economics USA in New York, which is among the best forecasters of the payrolls data over the past two years, according to data compiled by Bloomberg. “We can’t continue at December’s pace going forward — that’s not sustainable.”

While employment at temporary-help agencies and couriers declined in January following a ramp-up ahead of the year-end holidays, the labor market showed strength elsewhere.

By Industry

Retailers added almost 58,000 jobs last month, the most since November 2014, and the health care industry took on another 44,000 workers. Perhaps most surprising was a 29,000 gain in hiring at manufacturers, the biggest increase since August 2013.

Payrolls picked up at producers of fabricated metals, automobiles, food and furniture. Within retail, department stores and clothing outlets added a combined 26,500 jobs.

The median forecast in a Bloomberg survey called for a 190,000 gain in overall payrolls last month, with estimates ranging from gains of 142,000 to 260,000.

December payrolls were revised down to 262,000 from 292,000 and November employment was revised up to 280,000 from 252,000. The revisions to these months subtracted a total of 2,000 jobs to overall payrolls.

Friday’s data showed a much-awaited pickup in wage growth is starting to manifest itself. Average hourly earnings rose 0.5 percent from a month earlier to $25.39. The year-over-year increase of 2.5 percent followed a 2.7 percent jump in the 12 months ended in December, which was the biggest advance since mid-2009.

At least some of the increase was due to 14 states beginning the new year with higher minimum wages. Of those, 12 increased their minimums through legislation, while two states automatically boosted their wage rates through cost-of-living adjustments.

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