U.S. job growth slows, but wages rebound strongly

Fri Jan 6, 2017 4:26pm EST
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. employment increased less than expected in December but a rebound in wages pointed to sustained labor market momentum that sets up the economy for stronger growth and further interest rate increases from the Federal Reserve this year.

Nonfarm payrolls rose by 156,000 jobs last month, the Labor Department said on Friday. The gains, however, are more than sufficient to absorb new entrants into the labor market.

Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the work-age population. Employers hired 19,000 more workers than previously reported in October and November.

"With wages on the rise and payrolls solid, the Fed is no doubt taking a healthy celebratory lap, feeling confident after this morning's report in their decision to hike in December, and cautiously optimistic as they look out to the new year," said Lindsey Piegza, chief economist at Stifel Fixed Income in Chicago.

The economy created 2.16 million jobs in 2016. Average hourly earnings increased 10 cents or 0.4 percent in December after slipping 0.1 percent in November. That pushed the year-on-year increase in earnings to 2.9 percent, the largest gain since June 2009, from 2.5 percent in November.

The unemployment rate ticked up to 4.7 percent from a nine-year low of 4.6 percent in November. Still, it remained below 4.8 percent, the Fed's estimate of the natural rate of unemployment, for two straight months. Economists had forecast payrolls rising by 178,000 jobs last month.

The dollar .DXY rose against a basket of currencies on the data. Stocks on Wall Street ended higher, with the Standard & Poor's 500 index .SPX hitting a record high and the Dow Jones industrial average .DJI flirting with the 20,000 mark.

Prices for U.S. Treasuries fell, with the yield on the 30-year bond US30YT=RR rising to 3 percent.   Continued...

People wait in line to enter the Nassau County Mega Job Fair at Nassau Veterans Memorial Coliseum in Uniondale, New York October 7, 2014. REUTERS/Shannon Stapleton/File Photo