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  Dr. Sohn's Commentary

Nonfarm Payroll Report for January

February 03, 2017

The economy added 227,000 jobs in January accelerating the pace of job growth. The increase was widespread with construction, retail and financial services leading the way. The November and December numbers were revised down by 39,000.  The unemployment rate edged up to 4.8 percent from 4.7 percent as more people looked for jobs. Wage gains rose 0.1 percent for the month amounting to 2.5 percent from a year ago.

After doldrums during the fourth quarter, employment gains have picked up momentum despite the fact that the economy is hovering around full employment. The overall picture of the economy is a healthy one. Going forward, the implementation of some of the Trump economic programs will boost employment and economic activities.


A small disappointment is the average hourly earnings rising 0.1percent from the previous month or 2.5 percent from a year ago. The December gain was revised down to 0.2 percent from the original report of 0.4 percent. Despite these numbers, all indications are that wages are rising at a faster pace. Higher minimum wages went into effect in many states including California and more states will follow. A more comprehensive indicator of earnings---Employment Cost Index---has been showing healthy increases in overall pay.


Surveys by NFIB also point to wage pressures as the labor market tightens. Small businesses are more comfortable about the economic outlook and has been hiring people at a good clip. NFIB surveys for the past several months have shown that hiring is the biggest problem facing them. In response to lower fuel prices, better demand and easing credit conditions, SME hiring has been a source of employment strengths and layoffs have been slowing.


The jobless rate ticked up to 4.8 percent from 4.7 percent for the right reason. The word is out that there are jobs out there and pay is going up. More people flocked to the employment market pushing up the jobless rate a bit.


The ongoing economic trend will give more ammunition to the FOMC to raise the interest rate possibly hiking the rate again in mid-March. The central bank could raise the interest rate as many as four times depending on the timing and the size of economic stimulus from the Trump Administration. Sung Won Sohn


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