LIVE MARKETS-Fire and ice: A jobs report drill-down

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

FIRE AND ICE: A JOBS REPORT DRILL-DOWN

A significant payrolls miss and hotter-than-expected wage growth, counterbalanced with dipping unemployment and rising labor market participation, made for a mixed report that was heavily affected by wildfires and snowstorms.

The U.S. economy added 143,000 jobs USNFAR=ECI in January, tumbling 53.4% from December's upwardly revised 307,000, and coming in 27,000 shy of consensus.

The wildfires in California and the punishingly cold weather that plagued the country for the first several weeks of the year likely had an effect on the headline.

Drilling below that headline, jobs in the services sector, on a net basis, accounted for all private payroll gains; both numbers landed at 110,000. And the 32,000 increase in government payrolls seems quite likely to reverse itself in next month's report, as Trump's mass firings work their way into the data.

This report marks the seventh month in the last 12 that landed south of 200,000, and the sixth over the last year to fall sort of expectations.

But labor market data, taken together with upward revisions, is pretty much what the doctor ordered according to Jim Baird, chief investment officer at Plante Moran Financial Advisors.

"Taken in its totality, the data translates to labor conditions that are neither too hot nor too cold – consistent with a soft landing for the economy," Baird writes. "It may not have been a goldilocks report, but it was close enough."

The average hourly wage growth data the first official glimpse at January inflation.

And the news isn't great. Wage growth accelerated to 0.5% from 0.3% on a monthly basis.

Year-over-year, wages grew 4.1%, a repeat of December's upwardly revised figure.

"It's a report that raises inflation and inflation fears," Peter Cardillo, chief market economist at Spartan Capital Securities tells Reuters.

"It means the Fed will probably continue with its wait-and-see attitude," Cardillo added, saying that the Fed's waiting and seeing "might actually have to be longer than perhaps what the market is expecting."

While its true that hotter inflation readings kick the rate cut can down the road, the glass half full crowd will note that wages are growing at a faster pace than other major indicators, which means more cash in the pockets of the consumer.

Next, the unemployment rate unexpectedly (and counterintuitively) dipped to 4.0% from 4.1% even as the labor market participation rate showed a slight improvement, rising a tenth of a percentage point to 62.6%.

Analysts expected a repeat of December's print.

Typically when workers leave the sidelines and jump into the labor pool, it puts upward pressure on the unemployment rate.

But that too, could be the lingering effect of wildfires and cold snaps.

"The Fed will likely take the unemployment rate’s dip with a grain of salt since it tends to move lower during natural disasters then rebound during the recovery," says Bill Adams, chief economist at Comerica Bank.

Looking at unemployment duration, the newly unemployed (fewer than five weeks) saw their slice of the total pie grow bigger, while those jobless for five weeks or longer accounted for shrinking pie slices.

Average unemployment duration shrank from 23.3 weeks to 20.6, hinting at a hiring uptick, a notion supported by this week's manufacturing and services PMI reports from the Institute for Supply Management, both of which showed improvement in their respective employment components.

When broken down by race/ethnicity, White unemployment dipped to 3.5% from 3.6%, while joblessness among Black workers increased to 6.2% from 6.1%.

This resulted in a 20-basis-point widening of the White/Black unemployment gap.

(Stephen Culp)

FOR FRIDAY'S EARLIER LIVE MARKETS POSTS:

WALL STREET EASES EARLY WITH AMAZON - CLICK HERE

U.S. STOCK FUTURES TAKE LATEST JOBS DATA IN STRIDE - CLICK HERE

A GREY BRITISH OUTLOOK MIGHT MAKE SHORT SELLERS GRIN - CLICK HERE

GERMAN ELECTION: GET KENYA, BUY DOMESTIC - CLICK HERE

BOE'S DOVEISH VOTE SPLIT HIDES MORE NUANCED STORY - CLICK HERE

DEALS IN THE DRIVING SEAT - CLICK HERE

EUROPE BEFORE THE BELL: STOXX SET FOR SEVENTH WEEK OF GAINS - CLICK HERE

MORNING BID EUROPE - CHINA AI RALLY ROUSES TRADE WAR-WEARY MARKETS - CLICK HERE