US jobless rate dips below 5% for first time since February 2008 to overshadow news that January jobs report was weaker than expected

Global stock markets fell on Friday after the news that US wages picked up and unemployment fell to an eight-year low raised the prospect of another interest rate rise in the world’s biggest economy this year.

The US jobless rate dipped below 5% for the first time since February 2008 to come in at 4.9% in January, the US Department of Labor reported. That fresh dip in unemployment and news that employers had increased hours for workers helped to overshadow a weaker than expected rise in new jobs in January.

The US economy added 151,000 jobs, well below expectations for 190,000 new jobs in a Reuters poll of economists. But financial markets took the jobs report as a whole as confirmation that the US labour market recovery remained well on track, despite a tumultuous start to the year for the global economy.

That fanned investor fears about another rate rise from the US Federal Reserve and at the time of the London close, Wall Street was down sharply. The Dow Jones industrial average and S&P 500 were both down more than 1% in early trading while the UK’s FTSE 100 closed down 0.9% at 5848.06.

US economy created 151,000 new jobs in January as jobless rate hits 4.9% - business live Read more

One of the brighter spots in the jobs report was a rise in US hourly earnings, which went up by 0.5%, or 12 cents. Over the year, average hourly earnings have risen by 2.5%. The Department of Labor has often referred to US wages as the “unfinished business of this recovery”.

On Friday, Barack Obama hailed the “longest streak of private-sector job growth on record” and stronger pay growth.

“Over the past six months, wages have grown at their fastest rate since early 2009,” the US president told reporters. “We’ve recovered from the worst economic crisis since the 1930s.”

But Obama also conceded that “softness” in China, Europe and other economies would continue to challenge US exporters.

The White House (@WhiteHouse) "We've recovered from the worst economic crisis since the 1930s." —@POTUS: https://t.co/oAm205Zui1 https://t.co/sdy9UTqLXi

The US Federal Reserve raised interest rates for the first time in almost a decade in December. Before Friday’s employment data, financial markets had not been pricing in another rate rise until 2017 but following the release they shifted to price in a 50% chance of a move in December.

Economists said the mixed report could be read different ways. “It 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,” said Rob Carnell at ING Financial Markets.

“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.”







The caution among investors, who had only recently been talking about a possible rate rise next month, reflects downbeat news on the US economy and a shaky global backdrop. Figures last week showed the US economy barely grew in the final three months of 2015, rising at an anaemic 0.7% annual rate.

Labour market experts warned that the slowdown in the pace of job creation could continue as employers announce cuts. Earlier this week, Yahoo said that it was shrinking its workforce by 15%. BP will cut 4,000 jobs from its exploration arm and 3,000 jobs from “downstream” refining, many of which are in Houston, Texas.



A merger between Royal Dutch Shell and BG Group will eliminate 10,000 jobs in 2015-2016, according to Shell’s chief executive, Ben Van Beurden.



Stock markets suspect Federal Reserve has interest rate jitters Read more

According to Challenger, Gray & Christmas, a global outplacement company that keeps track of layoffs, employers in the US planned to cut 75,114 jobs in January, up from December’s 15-year low of 23,622. The energy sector alone planned to cut 20,246 jobs, while retailers planned to eliminate 22,246.

“However confident Janet Yellen and her Fed colleagues were when raising interest rates in December, the US data released in January must be giving them food for thought – and today’s poor non-farm payroll figures are no different,” said Dennis de Jong, managing director at UFX. “Adding less than 200,000 jobs for the first time since October, coupled with lower than expected GDP and productivity figures, has taken some of the shine off of the previously buoyant US economy.”