US January unemployment rate likely to be at 4.9%

The US is expected to have recorded a solid gain of 210,000 in non-farm payrolls in January that might cut the jobless rate to 4.9%, which will be on par with the US Fed's median estimate of the long run equilibrium rate. The US Bureau of Labor Statistics will be revising all of the unemployment and the employment data in its upcoming release. According to the preliminary results, the level of March 2015's non-farm payroll employment will be revised down by 208,000.

The rate of employment gains surged towards late 2015, with December's three-month average gain increasing to 284,000 from September's 174,000. This indicates that the labor market conditions were not affected by the expected slowdown in Q4 GDP growth. Also, it shows that the growth in productivity continued to remain weak.

In recent weeks, jobless claims have increased slightly; however, they are much below 300,000. The ISM non manufacturing employment index indicates to continued growth in private services payrolls of over 200,000 per month. Meanwhile, the factory sector is likely to have registered moderate gains that have added 13,000 jobs in Q4. However, a monthly increase of almost 300,000 is not expected in January. Employment in Q4 is likely to have been increased by the unseasonably warm weather.

The December jobless rate was at 5%, whereas the average weekly earnings were unchanged for the month. The average weekly earnings for January is expected to have risen by 0.3% m/m; however, the rise of 0.6% m/m in January 2015 implies that the annual rate is likely to drop to 2.1% from 2.5%. However, wage growth is likely to accelerate later in 2016 as there are several signs indicating the rapid tightening of labor market conditions.