Economic Recovery

The low unemployment rate caught the attention of financial markets and reinforced opinion that interest rates were likely to go higher. "Those who said the Fed has only one or no more increases coming are going to revise their opinions," predicted economist Stanley Nabi of Silvercrest Asset Management in New York.
The U.S. central bank has raised its trend-setting federal funds rate 14 times since mid-2004 in quarter-point increments, most recently on Tuesday when it hiked the rate to 4.5 percent. The low unemployment rate is likely to heighten its concerns about tight labor markets.
"It (the jobless rate) is probably at or slightly below the level the Fed is thinking is full employment, so it will strengthen their resolve to lean against inflation pressures," said economist Elisabeth Denison of Dresdner Kleinwort Wasserstein in New York. "We expect another quarter-point hike in March."
Average hourly earnings rose to $16.41 in January from $16.34 in December. In the 12 months through January, earnings have risen by 3.3 percent, the largest for any 12-month period in nearly three years, since February 2003.
"These are the kinds of things that raise eyebrows at the Fed," said economist Cary Leahey of Decision Economics in New York. "The implication that this January report has for wage inflation is bothersome to the market and the Fed."
Previously, the department said 108,000 jobs were created in December but it pushed that up to 140,000 and it said that, in November, 354,000 jobs were created rather than the 305,000 it reported a month ago.

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