Via Financial Times

The US labour market started the election year in solid shape, adding more jobs than forecast in January and with wage growth pushing back above 3 per cent.

Non-farm payrolls increased by 225,000 in the first month of the year, according to data on Friday from the US labour department. That was up from December’s upwardly revised tally of 147,000 (previously 145,000), which was the fewest since May, and compared with the median forecast among economists for 160,000.

The unemployment rate ticked up slightly to 3.6 per cent, from December’s 50-year low of 3.5 per cent and forecasts it would remain at that level.

Wages increased 3.1 per cent in January from a year earlier, an improvement after the annual rate of wage growth fell below 3 per cent for the first time since 2018 during December. That was better than economists’ forecasts for 3 per cent.

In an encouraging sign, and in addition to December’s revision, non-farm payrolls for November were bumped up by 5,000 to 256,000, suggesting the labour market was in firmer shape towards the end of 2019 than previously reported.

Futures for the S&P 500 were pointing to a 0.2 per cent drop at opening bell on Friday, roughly the same move they anticipated ahead of the release of the data.

Despite the strong jobs report, US Treasuries rallied on Friday, with the yield on the benchmark 10-year note falling as much as 2 basis points to 1.6 per cent. The two-year note saw its yield slip roughly 1 basis point to 1.4 per cent.

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Traders are still pricing in at least one quarter-point reduction in the Federal Reserve’s main policy rate by the end of the year, according to futures prices compiled by Bloomberg.

The report follows forecast-busting labour market data from ADP earlier this week, which showed private-sector payrolls jumped by 291,000 in January, far more than the 157,000 economists expected.

Economists at Jefferies said that although the overall jobs report was strong, there were some signs of weakness in the household survey from which the jobless rate is calculated.

“For most of the second half of 2019, the household survey had produced enormous increases in employment and declines in unemployment, resulting in a steady decline in the unemployment rate. This month, we have some payback,” they wrote in a note.

Ahead of the labour report, economists at Goldman Sachs, who estimated the addition of 190,000 jobs in January, said they expected “an unseasonably dry survey week in the north-east and Ohio Valley is set to boost weather-sensitive categories” and also pointed out that job growth in the first month of the year “tends to accelerate in tight labour markets, as labour supply constraints may lead firms to implement fewer end-of-year lay-offs.”