US Jobless Rate Falls But Hiring Slows Down

The US unemployment rate fell to 4.9% last month but the pace of hiring slowed as the economy added just 151,000 net new jobs.

January's jobs report - always closely watched by investors and economists alike - painted a confusing picture of the US economy.

While the job creation figure came in more than 40,000 below expectations - and was well down on the totals reported in recent months - the decline in the jobless rate, from 5%, was not expected.

The 4.9% rate means it is at its lowest level since February 2008.

The Labour Department cited manufacturers, retailers and the hospitality industry offsetting job losses in the education, transportation and temporary worker sectors.

Despite the clouded picture, perhaps the best barometer of US economic health was contained in the wage numbers.

Average wages jumped 2.5% over the past year to $25.39 an hour, the report said, supporting economists who have argued that strong consumer spending and higher employment would help shelter the economy from weaknesses elsewhere.

While the world oil price collapse and stronger dollar have hammered oil industry investment and exporters respectively, the low cost of filling up at the pump has boosted consumer spending power.

US President Barack Obama trumpeted the new low in the jobless rate.

"The United States of America, right now, has the strongest, most durable economy in the world," he said.

Members of the Federal Reserve's rate-setting committee, who judged in December that the US economic recovery was strong enough to take the first interest rate rise since the financial crisis , have since been forced to contemplate a slower rate rise path.

But stock markets plunged on Friday and the dollar strengthened following the release of the jobs report, on fears that strong wage growth would mean rates rising more quickly than investors had been hoping.

That was depsite separate figures released on Friday showing the US trade deficit rose in December, as exports fell for a third straight month - highlighting the pressures on exporters from a stronger dollar and weaker global demand.

Rob Carnell, chief international economist at ING Commercial Banking, said of the jobs report: "It (Other OTC: ITGL - news) is difficult to see exactly what the Fed will make of this.

"But with global financial conditions tightening, this release says 'more data needed' before drawing any firm conclusions about any shift in Fed policy.

"That does at least suggest that a March hike remains off the table.

"And hopefully by then, we will have a better idea of whether things are really slowing, with no further hikes possible, or whether recent data were just a soft patch and the Fed can resume tightening later in the year."