U.S. Job Growth Misses Estimates In January But Unemployment Rate Drops

Employment in the U.S. rose by less than expected in the month of January, according to a report released by the Labor Department on Friday, although the unemployment rate still edged lower.

The Labor Department said non-farm payroll employment climbed by 151,000 jobs in January compared to economist estimates for an increase of about 188,000 jobs.

While the report also said the jump in employment in December was downwardly revised to 262,000 jobs from 292,000 jobs, the increase in employment in November was upwardly revised to 280,000 jobs from 252,000 jobs.

With the combined revisions, job growth in November and December was only 2,000 jobs lower than previously reported.

The Labor Department said the increase in employment in January was led by retail trade, food services and drinking places, health care, and manufacturing.

However, the report also pointed to declines in employment in private educational services, transportation and warehousing, and mining.

Even though the job growth came in below estimate, the unemployment rate still edged down to 4.9 percent in January from 5.0 percent in December. Economists had expected the rate to come in unchanged.

The unexpected decrease pulled the unemployment rate down to its lowest level since a matching rate in February of 2008.

The drop by the unemployment rate came as household employment jumped by 615,000 people, while the labor force increased by 502,000 people.

The report also said average hourly employee earnings climbed by $0.12 or 0.5 percent to $25.39 in January. Compared to the same month a year ago, hourly earnings were up by 2.5 percent.

"It is difficult to see exactly what the Fed will make of this," said Rob Carnell, Chief International Economist at ING Commercial Banking. "But with global financial conditions tightening, this release says 'more data needed' before drawing any firm conclusions about any shift in Fed policy."

"That does at least suggest that a March hike remains off the table," he added. "And hopefully by then, we will have a better idea of whether things are really slowing, with no further hikes possible, or whether recent data were just a soft patch and the Fed can resume tightening later in the year."

The Federal Reserve is scheduled to hold its next two-day monetary policy on March 15th and 16th.