2019.02.0109:14:00UTC+00U.S. Job Growth Exceeds Estimates But Unemployment Rate Inches Higher

A closely watched report released by the Labor Department on Friday showed employment in the U.S. jumped by much more than expected in the month of January, although the report also showed a substantial downward revision to the pace of job growth in December.

The Labor Department said non-farm payroll employment surged up by 304,000 jobs in January compared to economist estimates for an increase of about 165,000 jobs.

However, the report also showed the spike in employment in the previous month was downwardly revised to 222,000 jobs from the initially reported 312,000 jobs.

Andrew Hunter, Senior U.S. Economist at Capital Economics, said the jump in employment in January still provides "further evidence that economic growth remains solid and that the government shutdown had little impact."

"The Fed made it pretty clear this week that rates will remain on hold in the near term but, if employment growth remains this strong, there is still a fair chance of one more rate hike in the first half of this year," he added.

The much stronger than expected job growth in January reflected job gains in several industries, including leisure and hospitality, construction, healthcare, and transportation and warehousing.

Despite the strong job growth, the unemployment rate unexpectedly inched up to 4.0 percent in January from 3.9 percent in December. Economists had expected the unemployment rate to be unchanged.

The unemployment rate ticked up to its highest level since last June, as the household survey measure of employment showed a decrease of 251,000 due to a rise in workers on temporary layoff as a result of the government shutdown.

Meanwhile, the report said average hourly employee earnings rose by 3 cents to $27.56 in January, reflecting a 3.2 percent increase compared to the same month a year ago. The annual rate of growth slowed from 3.3 percent in December.

"Wage growth will probably trend higher again over the coming months but, with little sign that this is feeding through to sustained upward pressure on inflation, it is unlikely to have a major bearing on the Fed's plans," said Hunter.