WASHINGTON, FEB 5: Employment in the booming US economy soared in January while the jobless rate fell to a 30-year low, the government said in a report on Friday that raised the odds of more interest rate hikes in the coming months.The Labour Department said the economy added 387,000 jobs outside the farm sector, the biggest jump in more than two years and many more than the 255,000 Wall Street forecasters had predicted. The unemployment rate dipped to 4.0 per cent from 4.1 in December, in line with Wall Street expectations and the lowest level since January 1970. The strength of the report was partly due to unseasonably mild weather during the period covered."I think the message is clear from this report that knowing means growing in this economy, and that investing in the skilling and training of our workers is breaking down employment barriers and opening opportunity for everyone," US Secretary of Labour Alexis Herman said after the release. The monthly employment report is one of the most importantindicators of current economic activity in the United States. January data underscored the extraordinary demand for workers who are in increasingly short supply, forcing employers to pay higher wages to attract labour.The US Federal Reserve raised the two short-term interest rates it controls by a quarter-percentage point on Wednesday in an attempt to slow the vibrant economy and prevent an overheating which could push up inflation. The dwindling supply of available workers has been a key concern for the Fed.Even before the data, Wall Street economists were expecting another rate hike in March and at least one more by mid-year. The employment report solidified those expectations. "Overall the data is strong," said Alan Ruskin, research director at 4Cast Inc. in New York. "The three-month trend is very, very solid, pointing toward more Fed (credit) tightening in the months ahead."Inflation-sensitive bonds fell sharply after the data but stocks, in a now familiar pattern, once again proved resilient tothe specter of higher interest rates even though they cut into corporate profits. The Dow Jones industrial average of blue-chip stocks was flat at midday.The benchmark 30-year long bond was off 1-29/32 at midsession and the yield, which moves in the opposite direction of the price, rose to 6.28 percent. However, there have been a number of crosscurrents in bond trading this week. The shrinking supply of government debt as a result of budget surpluses is causing some turmoil in Treasuries and has been the primary force moving the market. Average hourly earnings, a closely watched barometer of wage inflation, rose 0.4 percent to $13.50 from $13.44 in December versus a forecast gain of 0.3 percent. Labour's Herman said growth in worker productivity was still outpacing growth in real wages.Increasing productivity helps offset inflation from higher wages. "When you look at what's happened with real wages, this is an economy that is still in balance," Herman said in a teleconference with reporters. "It is notas though we saw a spiraling. in wage growth" in 1999, she added.January saw the biggest rise in non-farm payrolls since a 408,000 jump in September 1997. Payrolls rose 316,000 in December. The unemployment rate was the lowest since January 1970, when it was 3.9 percent. President Clinton lauded the low unemployment rate, saying the economy had now created nearly 21 million jobs since 1993. The pool of available workers, on which Fed Chairman Alan Greenspan is keeping a close eye, shrank 2.1 percent to 9.94 million in January from 10.16 million in December.The pool of available workers measures those who are unemployed and those who might rejoin the work force with the right incentives such as childcare or transportation. Herman said the government was looking for other soures of available workers, such as some of three million part-time workers who could possibly step up to full-time jobs. Treasury Secretary Lawrence Summers said it was crucial to increase the supply of labour through the rightprogrammes."An economy where jobs are looking for people as well as people looking for jobs is one of the best social programmes we have," he said at a White House news conference. "An economy where employers are looking hard for workers isan economy where they will invest more in training. It is an economy where they will invest more in those who've traditionally been disadvantaged.," he added.
