Markets cool to jobs data

US job growth slowed more than expected in December, but the pace of hiring likely remains sufficient to keep the longest economic expansion in history on track despite a deepening downturn in a manufacturing sector stung by trade disputes.
The Labour Department's closely watched monthly employment report on Friday also showed the jobless rate holding near a 50-year low of 3.5 per cent. A broader measure of unemployment dropped to a record low last month, but wage gains ebbed.
The mixed report will probably not change the Federal Reserve's assessment that both the economy and monetary policy are in a "good place."
Meanwhile, the US dollar rose two-week highs on Friday, on track for its biggest weekly gain in two months, helped by easing geopolitical tension between the US and Iran, with investors shrugging off a weaker-than-expected US non-farm payrolls report for December.
Against a basket of currencies, the dollar gained 0.1 per cent on Friday to 97.50, taking its cumulative gains this week to 0.7 per cent, on track for its biggest weekly rise since early November. During the session, the dollar index hit a two-week high of 97.584.
The dollar was also modestly higher versus the safe-haven yen at 109.58 yen after touching a four-week peak during the session. The greenback also rose 0.2 per cent versus the Swiss franc at 0.9748. The yen's and Swiss franc's losses reflected fading worries about an imminent US-Iran conflict.
"The galvanising force for the dollar rally this week was the fizzling of tensions in the Middle East with the recent US data also giving investors some further room for optimism," said Ricardo Evangelista, a senior analyst at ActivTrades. The euro was also down 0.1 per cent against the dollar at $1.1100.
The Wall Street stocks were flat early on Friday following a mixed US jobs report amid continued optimism on US-China trade relations. Rubeela Farooqi, chief US economist at High Frequency Economics, said the report was "supportive of an 'on hold' Fed stance, though we would have to see coming months readings to see if the slowdown in payrolls is more persistent.
The Dow Jones Industrial Average stood 28,942.51, down 0.1 per cent. The broad-based S&P 500 was up a hair at 3,275.56, while the tech-rich Nasdaq Composite Index was essentially unchanged at 9,204.17. All three indices finished at records on Thursday amid relief that a US-Iran conflict did not appear to be escalating and that trade deal with China is slated to be signed later this month.
"There is nothing here that changes the picture of an economy that is continuing to expand at a pace that exceeds its potential growth rate," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. "The Fed should be very comfortable with this report."
Non-farm payrolls increased by 145,000 jobs last month, with manufacturing shedding jobs after being boosted in November by the return to work of about 46,000 production workers at General Motors after a strike, the government's survey of establishments showed. But milder-than-normal temperatures in December boosted hiring at construction sites, and employment at retailers surged last month.
Some of the slowdown in overall job growth in December is likely due to seasonal volatility associated with a later-than-normal Thanksgiving Day. Economists polled by Reuters had forecast payrolls rising by 164,000 jobs in December.
Roughly 100,000 jobs per month are needed to keep up with growth in the working-age population. Data for October and November was revised to show 14,000 fewer jobs added than previously reported. The economy created 2.1 million jobs in 2019, down from 2.7 million in 2018.
Reports on housing, trade and consumer spending have suggested that the economic expansion, now in its 11th year, is not in immediate danger of being derailed by a recession. Worries that a downturn might be triggered by the Trump administration's trade war with China spurred the Fed to cut interest rates three times in 2019.
Indeed economic growth did slow last year, throttling back to 2.1 per cent in the third quarter from 2018's brisk pace of nearly 3 per cent. Now, though, with a Phase 1 deal with China set to be signed next week, policymakers are more confident in the outlook and last month signalled borrowing costs could remain unchanged at least through this year. Economists are pegging growth at the end of last year around a 2.3 per cent rate.The dollar fell against a basket of currencies after the data, while US Treasury prices rose. US stock index futures pared gains.
Tight labour market
The labour market has continued to churn out jobs at a healthy clip, despite anecdotal evidence of worker shortages, which economists had feared would significantly restrain hiring.
There are, however, concerns the Labor Department's Bureau of Labor Statistics (BLS), which compiles the employment data, may not be fully capturing the impact on payrolls of President Donald Trump's 18-month-long trade war with China, which has pushed manufacturing into recession and led to company closures.
The government last August estimated that the economy created 501,000 fewer jobs in the 12 months through March 2019 than previously reported, the biggest downward revision in the level of employment in a decade. That suggests job growth over that period averaged around 170,000 per month instead of 210,000. The revised payrolls data will be published next month.
The projected massive revision has attracted the attention of some Fed officials. Minutes of the US central bank's Dec. 10-11 policy meeting published last week showed a "couple" of officials viewed the anticipated downgrade as an indication "that payroll employment gains would likely show less momentum coming into this year."
Economists say downward revisions of that magnitude suggest that the model the government uses to calculate the net number of jobs from new business and closings is faulty. Some expect payrolls growth beyond last March could also be revised down. - Reuters, AFP