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Nonfarm payrolls grew by 227,000 in January while the unemployment rate edged higher to 4.8 percent, the Bureau of Labor Statistics reported Friday.
Economists surveyed by Reuters expected payrolls to grow by 175,000, compared with 157,000 in December, and the unemployment rate to hold steady at 4.7 percent.
There was little wage pressure, however, with average hourly earnings up just 3 cents and 2.5 percent on an annualized basis. The average work week was unchanged at 34.4 hours. The declining wage growth came even though 19 states increased minimum wage laws this month.
Markets reaction to the news saw stock market futures move higher while government bond yields fell.
The report was the first since President Donald Trump took office on Jan. 20. In the past, Trump has been critical of the unemployment rate, saying it understates the actual level of joblessness.
"The number is pretty right on target with the really positive momentum that we've seen in many of the markets over the last three to four months, particularly since the election," said Tony Bedikian, head of global markets at Citizens Bank. "This keeps the trajectory of optimism on course."
However, expectations for a Fed interest rate hike plunged, with a March move now given just a 9 percent chance from about 18 percent Thursday, according to the CME.
"The lack of wage growth suggests further room for tightening in the labor market," Curt Long, chief economist for the National Association of Federally Insured Credit Unions, said in a statement. "So long as that remains true, and with inflation still below target, the Fed will be content to hold off on further interest rate hikes."
A more encompassing measure of unemployment that includes those not looking for work as well as those holding jobs part-time for economic reasons rose two-tenths to 9.4 percent, the highest since October. However, those counted as not in the labor force declined from 95.1 million to 94.4 million. The labor-force participation rate rose to 62,9 percent, its highest level since September though still in keeping with levels not seen since the late 1970s.
Job creation was strongest in retail, with 46,000 positions added despite the end of the holiday shopping season. Construction gained 36,000, financial activities were up 32,000 and professional and technical services saw a 23,000 gain. Bars and restaurants contributed 30,000 to the total, while health care added 18,000.
Full-time jobs surged, climbing by 457,000 to 124.7 million, while part-time positions plunged by 490,000 to 27.4 million, according to the household survey.
"It is not all good news when it comes to the US jobs number because if you peel the layers, it shows that the downside surprise is in the wage report and a lot of disappointment there," Naeem Aslam, chief market analyst at Think Markets, said in a note. "We still need to see more readings before we can see that there is a trend because this number is full with noise.
Revisions from previous months subtracted 39,000 from the 2016 total, with November cut from 204,000 to 164,000 and December edging higher from 156,000 to 157,000.
Friday's report comes amid a mostly positive climate for economic data. The Citigroup Economic Surprise Index is running around multiyear highs thanks in part to jumps in consumer and business confidence as well as stronger-than-expected readings on manufacturing and home sales.
Federal Reserve officials will be watching the jobs numbers closely as well. The central bank declined to raise rates at its meeting this week but has indicated three hikes could be on the way this year if conditions warrant.