US stocks fluctuated on Friday even as the Labor Department reported 2014 was the best year of jobs growth in 15 years.
Friday, January 9, 2015
The stocks opened higher at first but dipped lower, due in part to the first decline in hourly wages since 2013.
The S&P 500, Nasdaq and Dow each opened around 0.1% higher but have fallen since. Within 10 minutes of Wall Street’s open, The S&P 500 and Nasdaq were down nearly 0.1% while the Dow declined almost 0.2%.
Strong growth, weak wages
The US Labor Department reported that jobs growth outpaced analysts’ expectations, according to the Wall Street Journal. Nonfarm payrolls added 252,000 jobs in December to maintain the momentum built over the course of the past year. Unemployment clocked in at 5.6% in December, 0.2% lower than November and the lowest rate since June 2008. The Wall Street Journal had predicted a 5.7% unemployment rate in December and a 240,000-job increase.
Overall, employers created 2.95 million jobs in 2014 for the largest calendar-year gain since 1999, when the mark exceeded 3 million and unemployment was a meager 4.0%.
Despite the strong growth, the markets reacted to the news that hourly wages actually declined in some sectors and remained stagnant overall. For private-sector employees, hourly earnings fell 5 cents. In 2014, hourly wages logged in at 1.7% - just higher than inflation’s 1.3% pace.
Federal Reserve to consider interest rates
While the job growth alone might have been enough to convince the Federal Reserve that the economy was sufficiently strong enough to handle an interest rate hike, the wages data could give policy makers second thoughts. Still, some economists believe the Fed will have much to consider and the next few months could be pivotal.
“The US labor market continued to boom at the end of last year, adding further fuel to expectations that the Fed will be the first major central bank to start tightening policy in 2015,” Chris Williamson, chief economist at Markit, told MarketWatch. “However, the data flow over the next two months will be crucial in determining whether the FOMC will aim for mid-2015 or, as survey data indicate, rate rises could be delayed until later in the year if the economy shows signs of slowing.”
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