Steady Growth Expected in January Jobs Report in Wake of Rate Hike

Originally published on February 1, 2016.

The Bureau of Labor Statistics is due to release its first jobs report of 2016 this Friday at 8:30 am EST. Friday’s report is highly anticipated in the wake of the Federal Reserve raising short term interest rates this past December in a move to control inflation. December’s rate hike was the first in nearly a decade, raising short-term rates from near-zero levels to a range between 0.25 percent and 0.5 percent.

January’s report will be the first complete set of monthly data available since the rate hike. Economic Policy Institute EARN analyst Will Kimball cautions that it is likely too soon to see the effects of the raise, but regardless, many are looking to the report for reassurance that the economy is faring well amidst tumbling oil prices and stock market turbulence abroad. According to an Econoday survey of economists, the numbers are predicted to show stable growth across the board. Here’s what to expect on Friday morning:

Slowed, but Steady, Job Creation

Analysts expect to see 188,000 nonfarm payrolls added in January, with a range from 170,000 to 215,000. This number may be disappointing to some — it appears anemic compared to the 292,000 jobs created in December, and it is well below the average of 221,000 jobs created per month in 2015. However, the Econoday Economic Calendar assures that 188,000 jobs created would be a “healthy reading” for January. 188,000 jobs created would mean another month of robust job creation after a lull in October and August, when just 136,000 and 142,000 new jobs, respectively, were added.

“We’d like that trend to continue, and if it does, that will bode well for wages,” said Kimball. “As employment grows, there’s a better chance that employers are more desperate to attract employees.”

Unemployment Rate to Hold at 5%

Economists predict that the unemployment rate will hold at 5%, where it has stayed since October. Unemployment was at 5.7% one year ago in January 2015, and has declined steadily since. The unemployment rate has not dipped below 5% since hitting 4.9% in November 2007, on the brink of the Great Recession. Unemployment peaked at 10.0% in October 2010, but more than six years later, it appears that unemployment is close to a full recovery.

Also unchanged in January’s job report will be the length of the average workweek, which has held at 34.5 hours since September, after declining from 34.6 hours in August.

Wage Growth to Wake Up

Average hourly earnings are expected to rise 0.3% in January, after no change was reported for December. Wage growth has remained sluggish in the aftermath of the recession, concerning some analysts. Wages grew 2.5% to $25.24 from December 2014 to December 2015, but according to Kimball, that rise should be steeper.

“Year to year, that’s not terrible but we’d like to see an increase around 3.5%. Then [the Federal Reserve] can start discussing concerns about inflation. Up until then, we see a lot of room for workers to gain higher wages,” said Kimball.

Though short of Kimball’s 3.5% target, last year’s 2.5% growth is encouraging compared to recent years. Average hourly hours grew by 1.8% in 2013, and by just 1.7 % in 2014.