Unemployment drops below 5 percent to begin 2016

Category: Short-term Lending Published: Friday, 26 February 2016 Written by Super User

Hiring slowed in January as concerns about a global slowdown threw financial markets into crisis and fed fears of a recession, posing a quandary for Federal Reserve policymakers as they consider further tightening interest rates.

Employers added 151,000 jobs to start the year, and the unemployment rate fell to 4.9 percent, its lowest point in eight years, the Department of Labor reported Friday.

Growth was weaker than many economists expected and well below the past years monthly average of 222,000 jobs. Despite pockets of sluggishness, hiring was solid in January and underscored the economys resilience to international pressures, said Mark Hamrick, an economic analyst at Bankrate.com.

"Certainly, there are no shortage of reasons why employers would pause," Hamrick said. "But they havent stomped on the brakes either."

Economists have not ruled out the chance of a recession this year, but many say it is a long shot since most signs point to continued growth. Consumer confidence is high, the housing market is strong, and wages are starting to rise. The jobs figures for January followed a strong end to 2015 in which an average of 279,000 workers joined payrolls each month from October to December.

Still, Fridays report did little to assuage fears in financial markets, which have been roiled by concerns about a global slowdown.

The Dow Jones industrial average closed down 211.61, or 1.29 percent, to 16,204.97. The SP 500 declined 35.40, or 1.85 percent, to 1,880.05. The Nasdaq composite fell 146.42, or 3.25 percent, to 4,363.14.

Inventories are historically high, leading to job losses in transportation and warehousing as companies clear excess product.

Energy companies continue to get hammered by low oil and gas prices that have crimped revenue for drillers. Since peaking in September 2014, employment in the mining industry has fallen 17 percent.

Those pockets of weakness, plus disappointing economic growth in the fourth quarter, highlight the hurdles to overcome, said Huntington Bank economist George Mokrzan. "The economy is not hitting on all cylinders," he said.

However, the jobs report should not persuade policymakers at the Fed to pull back interest rates, Mokrzan said. The Fed raised its benchmark short-term lending rate in December and signaled as many as four rate increases could occur this year.

The Fed may delay the next increase until it can assess how the economy is holding up to a slowdown in China, low commodity prices and turbulence in financial markets.

If economic growth improves after a disappointing end to 2015 -- it grew at an annual rate of 0.7 percent in the fourth quarter, as measured by gross domestic product -- then the Fed would have more confidence to continue tightening.

"I think itll be important to watch the GDP," Mokrzan said. "If it goes back to normal in this recovery, around 2 percent, then I would expect the Fed to move at the end of this quarter."

Consumers appear to be in high spirits. The Conference Boards consumer confidence index rose 1.8 points in January, its highest level since October. Low gasoline prices have given consumers more money in their pockets, and wages surged in January. Average hourly pay increased 12 cents to $25.39, though growth has been a tepid 2.5 percent over the year.

More Americans began a job search last month. The labor force participation rate, or the number of working-age Americans who are working or looking for work, notched higher for the second consecutive month, although at 62.7 percent, it remains near historic lows.

"Its slow, but we are seeing an improvement in labor force participation," said PNC Bank economist Gus Faucher. "That is a sign of confidence in the labor market."

Braddock resident Henry Brock, 57, was sure enough in his prospects that he is looking to change careers. After 25 years as a carpenter, Brock said, he is ready to work in a less seasonal industry. This week, he attended a job fair at Rivers Casino on Pittsburghs North Shore and was interested in a maintenance position.

"Im still employed, but right now, things are in a little bit of a slowdown," Brock said. "I want to do a career change because with construction, I loved it when I was younger, but its inconsistent."

The leisure and hospitality sector has been among the stronger ones in the American economy, hiring 44,000 people in January. Retailers and restaurants showed decent gains, suggesting healthy consumer spending, which forms two-thirds of the economy.

But service-sector jobs tend to be lower-paying than goods-producing industries such as manufacturing.

Manufacturers added 29,000 jobs in January following a flat year in 2015. Construction companies added a modest 18,000 workers to payrolls, although that was following a strong December in which unseasonably warm weather allowed continued construction in outside projects that ordinarily would have been shut down until spring.

Chris Fleisher is a Tribune-Review staff writer. Reach him at 412-320-7854 or This email address is being protected from spambots. You need JavaScript enabled to view it..

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