Thursday, December 14, 2017
Business

Sluggish jobs report raises questions about the direction of U.S. economy

WASHINGTON — For the past two years, America's job-creation machine has been like The Little Engine That Could, chugging ahead with "I think I can, I think I can" regardless of headwinds at home or abroad.

The nation added 3 million jobs in 2014, making up all the ground lost in the Great Recession, and then piled on another 2.7 million jobs last year. All while the broader economy, as measured by the gross domestic product, grew at a relatively lackluster pace.

But the January jobs report, released Friday, suggests that the ever-dependable locomotive for the U.S. economy has encountered a hill that slowed it sharply.

The question now is whether it is just moving through an unusually steep patch or has finally met a hill it cannot conquer. The answer probably won't be known for a couple of months, but Friday's report has further clouded the outlook for investors and the Federal Reserve's interest rate policy.

The Labor Department said that employers added just 151,000 jobs last month, down from an average monthly gain of 283,000 in the fourth quarter of last year.

Economists caution that one can't make too much of a single month's data.

Besides, just over 150,000 new jobs should be more than enough to absorb growth in the workforce. And January's gains, while below expectations, still nudged the unemployment rate to 4.9 percent, the lowest in eight years.

Also, there was encouraging news for many who have jobs: Average hourly wages picked up at the start of this year, to a 2.5 percent annual growth rate, as the supply of available workers tightened. Some of that reflected a bump up in the minimum wage in a number of states and localities, affecting about 4.6 million workers.

President Barack Obama, commenting on the economy Friday at a news briefing, did not mention the job-growth slowdown in January but instead highlighted the continuing drop in the jobless rate, from 10 percent in 2009, and how that was now translating into bigger paychecks for workers.

"Over the past six months, wages have grown at their fastest rate since the crisis," the president said. He promoted his forthcoming budget proposal, arguing that it would "offer more opportunities for Americans to get the education and training they need for a good-paying job."

Looking at the job market in the context of the whole economy, it is probably true, as Labor Secretary Thomas Perez said, that the closer the economy comes to the summit of full employment, the steeper the climb to create new jobs.

"A slowdown in the quantity of jobs created coupled with wage increases" is what one would expect, he said in an interview Friday. "People are finally starting to get a raise after literally years of wage stagnation."

Important as all those potentially positive factors may be, the drop-off in job growth was well below analysts' forecast of 190,000. And the slowdown comes at a time of mounting worries about whether the American economy can continue to withstand a host of other pressures:

From China and Japan to Western Europe to Brazil and South Africa, the global economy is slumping. A strong dollar is making U.S. products more expensive for overseas buyers. Depressed commodity prices, including oil, may be helping consumers, but they have hurt U.S. corporate earnings, stock markets and manufacturing.

Paul Ashworth, an economist at Capital Economics, indicated that the labor market is stronger than the job-growth decline might suggest. Still, he described Friday's report as mixed, saying that "is another reason to suspect that the Fed will stand pat until at least the middle of this year while it waits to see how economic conditions develop."

Stocks posted steep losses Friday, ending the week with broad declines, as investors fretted over the jobs report.

Technology stocks fell especially hard, and shares of LinkedIn had their worst day in history.

The Dow Jones Industrial Average fell 211.75 points, or 1.3 percent, to 16,204.83. The Standard & Poor's 500 index lost 35.40 points, or 1.9 percent, to 1,880.05, and the Nasdaq composite dropped 146.41 points, or 3.3 percent, to 4,363.14.

Stocks were mostly lower throughout the day, but losses accelerated as the end of trading approached. With Friday's losses, the Dow was down 1.6 percent for the week, the S&P 500 fell 3.1 percent, and Nasdaq lost 5.4 percent.

In the energy markets, U.S. crude fell 83 cents to $30.89 a barrel on the New York Mercantile Exchange. Brent crude, the international benchmark, fell 40 cents to $34.06 a barrel in London.

Information from the Associated Press was used in this report.

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