The U.S. economy added 227,000 jobs in January in a show of strength that surprised the experts. The total was the highest in four months and it was significantly more than economists expected.
Wage growth, however, was disappointing, and the minimal 0.1 percent increase — below expectations for 0.3 percent — showed there is another gear the nation could reach under the Trump administration if the new president can make progress on his stated goal of strong and rapid growth.
The unemployment rate edged up 0.1 percent to 4.8 percent, but that only shows how encouraged jobless Americans have become. Even more of them are back in the labor market.
Economists that Reuters polled had predicted that payrolls would rise by 175,000 in January. The median forecast in a Bloomberg survey was for a gain of 180,000.
“There’s more slack in the labor market than the unemployment rate implies, but we’re continuing to make progress in absorbing that slack,” Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, told Bloomberg. “As that happens, wage and salary growth should gain additional traction.”
Business leaders and stock investors are showing confidence that President Trump’s plan to cut taxes and regulations and boost spending on rebuilding the nation’s infrastructure is a good growth strategy.
Mark Hamrick, senior economic analyst at the financial information website Bankrate.com, told the Los Angeles Times that the job growth in January could have been influenced by rising business and consumer confidence since the November election.
“On the one hand, you say businesses might not be willing to add workers until they see a rise in demand,” Hamrick said. “But on the other hand, they may be making some strategic decisions where they anticipate demand.”
Consumer confidence, as measured by The Conference Board’s Consumer Confidence Index, slipped a bit in January from the previous month’s exceptionally strong reading, which was a 15-year high.
The board said last week that the index dropped from 113.3 in December to 111.8 in January. Workers’ worries about pay were a significant reason.
“The decline in confidence was driven solely by a less optimistic outlook for business conditions, jobs, and especially consumers’ income prospects,” Lynn Franco, director of economic indicators at The Conference Board, said in a statement.
“Consumers’ assessment of current conditions, on the other hand, improved in January. Despite the retreat in confidence, consumers remain confident that the economy will continue to expand in the coming months.”
Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Mich., told Reuters that the “moderation in consumer optimism is likely attributable to a return to normalcy following the typical bounce in confidence that follows a presidential election. The bottom line is that the consumer sector is still ... poised for further spending growth in the coming months, providing a key support to the economy as a whole."
Most of the government’s reports last week were upbeat. The Commerce Department said consumer spending rose 0.5 percent in December, the largest increase for that month since 2009, when the country was just beginning to recover from the Great Recession.
Spending rose faster than personal income, which was up 0.3 percent. Inflation also was on the rise in December. Reuters reported that the Personal Consumption Expenditures Price Index — the Fed’s preferred measure of inflation — rose 0.2 percent after edging up 0.1 percent in November. In the 12 months through December the PCE price index had climbed 1.6 percent.
"Inflation will gradually accelerate over the next couple of years due to higher energy prices and stronger wage growth that leads firms to raise prices," Gus Faucher, deputy chief economist at PNC Financial in Pittsburgh, told Reuters.
After last week’s flurry of key data, relatively few reports are scheduled this week. This afternoon, economy watchers will see the December report on consumer credit.
On Friday, the University of Michigan will release its preliminary Consumer Sentiment Index for February. It will be the first reading in which President Trump fully emerges from former President Obama’s shadow and consumers weigh in on what they have seen from the new president since his inauguration.
Trump, for his part, likes the view of the economy that Friday’s jobs report gave him.
"So, we're very happy about that,” Trump said. “I think that it's going to continue big-league.”
Trump has focused on keeping jobs in the United States, and the January jobs report said encouragingly that manufacturing payrolls rose in January by 5,000. It marked the second consecutive month of gains.
"Plenty to build on here for Donald Trump, who has tended to put a premium on manufacturing jobs," Alan Ruskin, global head of G10 FX strategy at Deutsche Bank in New York, told Reuters.