US non-farm payrolls increase more than expected in January

Job creation Stateside picked up at the start of the year, amid stronger hiring in both the manufacturing and services sector.

In another welcome development, the unemployment rose by a tenth of a percentage point to 4.8% as the labour force participation rate moved up from 62.7% to 62.9%.

US non-farm payrolls increased by 227,000 in January, according to the Bureau of Labour Statistics.

That was better than the 168,000 gain expected by economists.

However, wage growth cooled from the previous month.

Hourly average earnings increased by 0.1% month-on-month (consensus: 0.3%), less than the downwardly revised estimate of 0.2% for the prior month (consensus: 0.4%).

In comparison to a year ago, the rate of growth in average hourly earnings slowed from 2.8% in December to 2.5% in January (consensus: 2.8%).

Another closely followed metric contained in the report, the average length of the work-week, was unchanged at 34.4 hours (consensus: 34.3) from the upwardly revised estimate of 34.3 for December.

Non-farm payrolls for the prior two months were revised down by a combined 39,000.

Hiring in the goods-producing sector increased by 45,000, as construction firms took on another 36,000 workers.

Private service-providing companies also added more workers, adding 192,000 in December after a rise of 150,000 in the month before.

Goverment payrolls on the other hand declined by 10,000 after a reduction of 8,000 in the month before.

The index of aggregate weekly hours, which some consider a proxy for monthly GDP, rose by 0.2% over the month after an increase of 0.4% in December.

By way of an immediate reaction, as of 1340 GMT the yield on the benchmark 10-year US Treasury note was off by one basis point at 2.46%.

However, the US dollar spot index saw a small spike, to stand 0.16% taller at 99.953.

"The 227,000 rise in non-farm payrolls in January suggests that the labour market started the year on a reasonably solid footing. However, the drop back in annual wage growth is another reason to think the Fed will hold off raising interest rates until June," said Andrew Hunter, US economist at Capital Economics.

Blerina Uruci and Rob Martin at Barclays Research added: "Overall, the headline job numbers in this report were stronger than we had expected; however, we see no reason to be overly optimistic in the detail. The modest rise in manufacturing employment points to stabilization in the sector, after a subdued performance for much of the past year, while the strong increase in services is likely a rebound from the unexpected weakness in December. When judging the economic outlook, we take considerable signal from employment growth. In our view, payroll increases in the 200k range are consistent with continued economic expansion, and as long as labor markets improve at or around this pace, we view risks surrounding the recovery as broadly balanced and see no substantive recession concerns."