(Reuters) - U.S. job growth slowed more than expected in December, but the pace of hiring remains more than enough to keep the longest economic expansion in history on track despite a deepening downturn in a manufacturing sector stung by trade disputes.

STORY: TABLE:

KEY POINTS:

* Dec nonfarm payrolls +145,000 (consensus +164,000) vs Nov +256,000 (prev +266,000), Oct +152,000 (prev +156,000

* Labor force participation rate 63.2%

* U-6 underemployment rate 6.7% vs Nov 6.9% (prev 6.9%)

* Dec average workweek, all private workers, 34.3 hrs vs Nov 34.3 hrs (prev 34.4 hrs), factory 40.5 vs 40.5, overtime unchanged at 3.2

* Dec jobless rate unchanged at 3.5%

MARKET REACTION:

STOCKS: S&P e-mini futures ESv1 pared slight gain, last up 0.16%, pointing to higher open

BONDS: Treasury yields mixed; 2-year US2YT=RR was little changed at 1.5803% and 10-year US10YT=RR slipped to 1.8528%

FOREX: The dollar index .DXY little changed near flat, up 0.06%

COMMENTS:

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA

“The numbers weren’t too far from expectations, consistent with moderate jobs growth. Overall there is a lot of seasonal noise but we’re seeing a modest gain in wages and I think that was probably the big surprise after you got a downward revision to the average hourly earnings in both October and November. So no real pressure for the Fed to raise rates. Doesn’t look like they’re going to be easing anytime soon and it is consistent with the idea that the Fed’s going to stay on hold.

“I don’t think there was really much expectation that this was going to move the markets on way or another. There is a realization that the payroll numbers in December and January are possibly distorted by seasonal issues.”

JOSEPH LAVORGNA, AMERICAS CHIEF ECONOMIST, NATIXIS, NEW YORK

“It’s a little bit softer than expected, it’s not that far from consensus. A 15,000 miss is nothing, the employment rate stayed low (at 3.5%) and the U-6 fell. The only mild surprises are the wage number slipped a little bit, which might be due to what’s happening in manufacturing because the earnings number doesn’t adjust for labor force composition. If they’re higher paying jobs, that’s going to tend to depress the number. That could be what’s happening.

“Then the hours worked fell. When you see hours decline especially this time of the year, when you have inclement weather, you always wonder if it’s a weather story. I’m just speculating on that.

“It’s a slightly softer number, that’s the bad news. The good news is manufacturing will turn and eventually wages will head back up, and more importantly this is a great number for stocks and financial markets. My fear is the economy does well this year and the Fed gets back in the tightening game and this is more evidence that there’s no inflation in the system and the Fed can let it run a bit.”

BIPAN RAI, NORTH AMERICAN HEAD OF FX STRATEGY, CIBC CAPITAL MARKETS, TORONTO

“The more relevant number is the wages data. We are close to the peak of the employment cycle in the United States. So this is the part of the cycle where we pay less attention to the change in non-farm payrolls, unless it’s material. It’s really about wages and what the path of inflation looks like. So the market is not going to react positively to this number.

“This doesn’t change Fed policy though. The Fed is quite comfortable being on the sidelines for now. What it does mean is that the U.S. dollar would be on the defensive. Certainly, being long dollar has been a popular position for some time so investors would be looking to clear out those positions.”

TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

“This report really drives home the rock-solid state of labor in the United States…Given the fact that the standard error in this thing is so significant, (this headline miss is) nothing short of close enough. More important is the underlying detail, the underlying detail really continue to drive home that the labor backdrop is tight. You saw an upward revision to wages in the prior month, which offsets some of the miss in the current month. The unemployment rate actually remains incredibly low, and out to the third decimal actually showed improvement. Even the underemployment rate improved. I think when you strip away some of the ‘headline stuff’ the guts of the report were really quite constructive if you were building the case for a consumer that’s going to continue to chug along. And this report is very consistent with this idea.”

DOUG DUNCAN, CHIEF ECONOMIST, FANNIE MAE, WASHINGTON D.C.

“The bottom line: it came in a little under consensus but still, there are more jobs than required to hold the unemployment rate constant over the long term.”

“Average hourly earnings continue to grow and the work week is stable. It kind of lines up with most of the commentary written by the Fed and others that the economy is perking along at something like trend growth, or a little above trend growth, so there aren’t any real dangers here.”

“All of this suggests that the economy is ok and it’s very consistent with our forecast of somewhere between 2% and 2.25% growth.”

“Not gangbusters, but not worrisome. We don’t think this will change the Fed’s mind on anything.”

QUINCY KROSBY, CHIEF MARKET STRATEGIST, PRUDENTIAL FINANCIAL, NEWARK, NEW JERSEY

“This does keep the Fed accommodative. This doesn’t suggest inflation is creeping higher. The low wage element does nothing to add to a fear about wages moving too high to quickly. This report is almost in line with consensus expect for the wage aspect. That was disappointing. I’m saying that because of the need for the consumer to be active participant in the economy but the market isn’t going to focus on this.”

“This report is not enough to move the market one way or the other.”

“We may be looking at consumer discretionary names weakened. They may have been overbought anyway and were poised for consolidation. This may be a catalyst in terms of the wage.”

JJ KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE, CHICAGO

“Nothing that anyone is going to go crazy on in this one. One thing I did see though to keep an eye on for the next couple of reports is the decline in manufacturing and transportation. One of the reasons I liked the last couple of jobs reports was because the transportation jobs increased so much so to see that decline gives me a note of caution. The retail numbers may not be as great as they initially appear only because if you look at building materials, garden supplies, etc one of the places we added jobs, they both lost jobs the month before, so I am just wondering if there is a timing factor there. From that point of view, I hate that retail and hospitality out of the first two areas normally, but given it is December, most of the retail jobs get added in October and November, again could be a little bit of a timing issue. In January I would like to see more business to business services back up there and healthcare leading the way.”

“This was as a milquetoast a report as (the Fed) could get, to be honest, so there is no reason to change any thought process on this one.”

SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS (via email)

“The number was a touch lighter than expectations but showed solid payrolls and wage growth, which should be enough to keep the consumer spending and the economy muddling along.

“The loss of manufacturing jobs and the downtick in the average workweek are disappointing and will bear watching in the coming months.

“The participation rate held steady while the underemployment rate fell, which shows that workers continue to find employment more suitable to their needs.

“Stocks were flat, while yields and the (dollar) fell. We believe investors should continue to remain fully invested, as a recession seems unlikely, and valuations are reasonable.”