Hiring Picks Up As Employers Add 225,000 Jobs In January

Updated at 11:23 a.m. ET

The U.S. labor market revved up in January, with employers adding 225,000 jobs. That's well above the number forecasters were expecting. The unemployment rate inched up to 3.6%, near a 50-year low, according to a new report from the Labor Department.

Employment growth for November and December was also revised upwards by a total of 7,000 jobs.

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Unusually warm weather contributed to a surge in construction last month, with 44,000 jobs added. Housing construction has also gotten a boost from low mortgage rates.

Hiring was also strong in service industries such as health care, education and hospitality, which have been steadily adding workers month after month.

Manufacturing continues to be a weak spot in the economy. Factories cut 12,000 jobs in January, despite signs of a recovery in manufacturing activity following a five-month slump.

"Manufacturing accounts for only 8.4% of payrolls, but it punches above its weight in the eyes of the markets, media and politicians," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "The trend clearly is deteriorating with the sector under pressure from the trade war."

White House economist Tomas Philipson said new trade deals with China, Canada and Mexico could give a lift to factory employment.

"We're very optimistic of a rebound in manufacturing taking place," Philipson said.

Retailers cut more than 8,000 jobs in a sign that brick-and-mortar stores continue to face pressure from the growth in online sales. By contrast, warehouses and transportation companies — which pack and deliver online purchases — added about 28,000 jobs.

Wage growth picked up a bit in January, though it remains modest given the very low level of unemployment. Over the past 12 months, average wages have risen 3.1%. That's more than enough to outpace inflation, boosting workers' buying power. But pay increases were higher earlier in the recovery.

"We wonder if the key response of businesses to the intensification of the trade war in the summer was to be more aggressive in pay negotiations," Shepherdson said. "If so, we doubt it can last as labor shortages become more acute."

The strong job market continues to draw new workers off the sidelines. Philipson estimates nearly three-quarters of new jobs in recent months have gone to people who were not previously looking for work. The share of adults in the labor force increased last month to 63.4%, the highest since 2013.

"I think there's still more room for the growth," Philipson said.

While the overall job market remains healthy, the Labor Department says past job gains were not as strong as initially reported. Once each year, the department updates its historical employment record using more complete information. Friday's revision shows employers added 514,000 fewer jobs between April 2018 and March 2019 than earlier surveys had indicated.

In the 36 months since President Trump took office, the U.S. has added 6.6 million jobs. By comparison, employers added 8.1 million jobs in the 36 months before that.

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