Transcripts

Employment's Strength Is Wall Street's Weakness

SUZANNE PRATT: Good news for job seekers was bad news for Wall Street today. The Labor Department said American businesses added far more jobs than expected last month. But that raised concerns among investors that the Federal Reserve isn't likely to cut interest rates anytime soon. The Dow fell 82 points while the NASDAQ lost 19. Scott Gurvey has more on today's employment data.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a hot jobs report in more ways than one. The unusually warm weather in the northeast meant workers in several industries who are normally laid off at this time of the year stayed on the job. That helped produce an unexpectedly large 167,000 increase in non-farm payrolls in December, following a November increase to 154,000 which was bigger than previously estimated. The unemployment rate held steady at 4.5 percent. Jan Hatzius of Goldman Sachs says the warm weather was particularly good for the construction sector and temporary outdoor workers. Construction lost 3,000 jobs in December, but that's far fewer than normal.

JAN HATZIUS, CHIEF US ECONOMIST, GOLDMAN SACHS: But even if you make some adjustment for that, I think the bottom line is that the labor market at this point is still doing more or less the same thing that it was doing six months ago, which is grow at a pace that's at least in line with the underlying trend.

GURVEY: The services sectors were strong in December with professional and business services adding 50,000 jobs and health care providers putting on 31,000 new workers. Compared to the same month a year earlier, average hourly wages were up 4.2 percent in December. That's above the inflation rate and means workers on average are seeing their first real wage increases in years. But that good news for workers also raises fears among inflation hawks who had been calling on the Federal Reserve to cut interest rates in response to signs the economy is slowing. Ethan Harris of Lehman Brothers thinks the increase in wages is something which should concern investors.

ETHAN HARRIS, CHIEF US ECONOMIST, LEHMAN BROTHERS: The Fed's already a little bit worried about inflation. This report shows a continued tight labor market. Unemployment rate is a little lower than they'd like to see. And wage growth picking up. So while we don't expect the Fed to hike rates in the next six months or so, the risks have increased with this report.

GURVEY: Most economists still believe that with GDP currently growing at two percent, the rate of job creation will slow down in the months ahead. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.