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U.S. hiring picked up in January and wages rose at the fastest annual pace since the recession ended, as the economy’s steady move toward full employment extended into 2018.

Nonfarm payrolls rose 200,000 -- compared with the median estimate of economists for a 180,000 increase -- after an upwardly revised 160,000 advance, Labor Department figures showed Friday. The jobless rate held at 4.1 percent, matching the lowest since 2000, while average hourly earnings rose a more-than-expected 2.9 percent from a year earlier, the most since June 2009.

Treasury yields and the dollar gained, while stock futures remained lower, as the data reinforced the Fed’s outlook for three interest-rate hikes this year under incoming Chairman Jerome Powell, including one that investors expect in March. The figures may also add to the likelihood of a fourth rate increase in 2018.

The report puts the nation closer to maximum employment -- one of the goals of the Federal Reserve -- and sets a solid tone for hiring this year following continued gains in payrolls in 2017. That could be starting to generate a long-awaited, sustained pickup in wages and boost demand in this expansion, which may also get a lift this year from tax-cut legislation signed by President Donald Trump in December.

“The gain in wages will add to concerns that inflationary pressures are building in the economy,” said Michael Feroli, chief U.S. Economist at JPMorgan Chase & Co., who correctly projected the payrolls gain. “It solidifies expectations that the Fed will hike in March. The question is, what will they signal for hikes after that?”

The Labor Department’s figures included its annual benchmark update to the establishment survey, spanning payrolls, hours and earnings over the past five years.

Average hourly earnings rose 0.3 percent from the prior month following an upwardly revised 0.4 percent gain, the report showed. The 2.9 advance from a year earlier -- which partly reflected a downward revision to the January 2017 wage figure -- compared with projections for a 2.6 percent increase. December’s gain was revised upward to 2.7 percent.

Durable Gains

Given the extent of revisions to past data, it may take some more time to determine whether wages -- which have been the soft spot of an otherwise strong job market -- are undergoing a more durable acceleration. During most of this expansion, businesses across the economy have largely resisted giving out more generous paychecks even as labor-market slack continued to diminish.

What Our Economists Say

The above-consensus payroll print and increase in average hourly earnings was partly tempered by a drop in the length of the workweek, which thereby weighs on aggregate income creation. However, elevated absences and curtailments due to inclement weather may have impacted the workweek, so the dip is likely to be temporary -- and hence less troubling that what would otherwise be the case.

The labor market is on solid footing, potentially accelerating, and on track to drive the unemployment rate lower in the near term. Lower unemployment and mounting wage pressures will test the Fed’s conviction to maintain its scheduled trajectory for rate increases in 2018 -- particularly if the dollar continues to depreciate at a rapid pace. 

-- Carl Riccadonna and Yelena Shulyatyeva, Bloomberg Economics

In addition, 18 states began the new year with higher minimum wages, and some companies have recently announced bonuses and salary increases following the passage of the tax-cut legislation. While determining the exact impact may be difficult, economists expect these developments will boost worker pay in 2018.

Faster wage growth also have the potential to feed into price gains. Fed policy makers this week left borrowing costs unchanged while adding emphasis to their plan for more hikes at a gradual pace. They also said inflation is expected to move up this year and to stabilize around their goal.

Revisions to prior reports subtracted a total of 24,000 jobs to payrolls in the previous two months, as November’s total was changed to 216,000 from 252,000, according to the report.

For all of 2017, the picture was more positive, with 2.17 million created in Trump’s first year as president, revised from a previous estimate of 2.06 million; in 2016, the last full year under President Barack Obama, the total was 2.34 million jobs.

Broad Strength

The breakdown of January data across industries showed strength across industries, especially in goods-producing jobs: Construction payrolls rose by 36,000 and manufacturing added 15,000 workers. That’s in line with the resurgence in factory activity and rebound in housing.

Service providers added 139,000 employees. Retailers increased headcounts by 15,400 positions in January, following a 25,600 decrease. The category of warehousing and storage -- partly associated with Internet shopping -- added 11,100 jobs, the report showed.

One weaker spot in the report was the average workweek for all private employees, which unexpectedly decreased to 34.3 hours from 34.5 hours.

Adjustments to population estimates starting in January make the unemployment and participation rates difficult to compare with previous months. When removing these adjustments, the labor force rose by 185,000.

Other Details

The U-6, or underemployment rate, rose to 8.2 percent from 8.1 percent; measure includes part-time workers who’d prefer a full-time position and people who want a job but aren’t actively looking
People working part-time for economic reasons rose by 74,000 to 4.99 million in January, though months aren’t directly comparable
Participation rate was unchanged at 62.7 percent; the rate, hovering near the lowest level since the 1970s, will continue facing downward pressure as older workers retire
Total private employment rose by 196,000 (est. 181,000) after increasing 166,000; government payrolls rose by 4,000
Number of people out of work for 27 weeks or longer, or the so-called long-term unemployed, fell as a share of all jobless to 21.5 percent from 22.9 percent
Economists reckon monthly payroll gains of about 100,000 are enough to keep
pushing down the unemployment rate, which is derived from a separate Labor Department survey of households

​The U.S. Federal Reserve has released the minutes of the January 2018 Federal Open Markets Committee (FOMC) meeting. While there were no major adjustments to the course the FOMC has set, this is the last meeting with Janet Yellen heading up the Fed.

In a unanimous vote, the Federal Reserve left its benchmark interest rate unchanged in a range of 1.25%-1.50%, as analysts were expecting, although many are expecting a rate hike during the March meeting.

In this report, the Fed removed previous references to disruptions from hurricanes. Also it said that:

Gains in employment, household spending, and business fixed investment have been solid, and the unemployment rate has stayed low. On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2 percent. Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Perhaps the main change to the Fed’s statement was concerning inflation. The FOMC noted that inflation expectations have recently increased, and the rate of price changes is expected to move up this year and stabilize around its 2% objective in the medium term.

According to the FOMC:

The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12-month basis is expected to move up this year and to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

Looking ahead, Jerome Powell will replace Yellen within the next week and is expected to maintain her cautious policy approach.

U.S. oil production surpassed 10 million barrels a day in November for the first time in nearly 50 years, a milestone that underscores the growing dominance of the U.S. oil industry.

While global oil exporters once dismissed shale as a flash in the pan, the industry has emerged more efficient than ever from a three-year oil price rout and is poised to take advantage of prices that are at their highest levels since late 2014.

In November, production rose to 10.038 million barrels a day, 4% more than the previous month, according to the U.S. Energy Information Administration. That is just shy of the monthly record of 10.044 million barrels a day in November of 1970.

The resurgence of the U.S. shale industry is the latest turn in the tug of war between shale producers and the Organization of the Petroleum Exporting Countries, which last year coordinated an output cut with other major exporters, including Russia. The group has been trimming about 2% of global oil supply in a bid to work off a glut and raise prices.

The efforts have paid off: prices have surged this year amid tightening supplies and world-wide economic growth that stirred surprisingly strong demand.

The prospect of a flood of new output from shale wells has tempered oil rallies at times but hasn’t much diminished investor enthusiasm lately. U.S. oil prices rose more than 7% in January and have posted monthly gains for five straight months--their longest streak since 2011. On Wednesday, U.S. crude futures rose 23 cents to $64.73 a barrel on the New York Mercantile Exchange and Brent, the global benchmark, rose 3 cents to $69.05 a barrel on ICE Futures Europe.

The new data bolster a prediction made at the end of 2017 by Rystad Energy, a consulting firm that tracks production data. At that time Rystad said that the U.S. had already hit the 10 million barrel a day marker, citing strong shale output gains in October that were masked by the effects from hurricanes on Gulf of Mexico pumping.

As U.S. producers pump more, oil imports from foreign countries are shrinking to new lows and American crude exports are rising. The petroleum trade deficit in the U.S. was 2.5 million barrels a day at the end of the year when looking across all types of petroleum liquids, including fuels such as gasoline and diesel, Rystad said. That is down sharply from a peak petroleum deficit of 12.5 million barrels a day in 2007.

Rystad expects that gap to keep shrinking because West Texas Intermediate oil is trading at a big discount to Brent, the global crude benchmark price. That allows U.S. refineries to run full tilt on cheaper crude close to home, while also making it economical to ship oil abroad.

Over the last decade, U.S. output has roughly doubled as companies became experts in forcing oil from shale formations by drilling and fracking long horizontal wells.

The EIA and the International Energy Agency have both predicted that U.S. output will average more than 10 million barrels a day this year. The IEA predicted earlier this month that the U.S. is on pace pull ahead of Saudi Arabia, which last year produced just shy of 10 million barrels a day, and will vie with Russia, with output of 11 million barrels a day, to become the world’s top oil producer.


​Exxon Mobil Earnings Soar on Tax Benefit Despite Production Decline

Exxon Mobil Corp. (NYSE: XOM) reported estimated fourth-quarter and full-year 2017 results before markets opened Friday. For the quarter, the integrated oil and gas giant posted quarterly adjusted diluted earnings per share (EPS) of $0.88 on revenues of $66.52 billion. In the same period a year ago, the company reported EPS of $1.22 on revenues of $61.02 billion. Fourth-quarter results also compare to the consensus estimates for EPS of $1.04 on revenues of $74.31 billion.

For the full year, Exxon reported revenues of $244.36 billion and GAAP EPS of $4.63, compared to 2016 revenues of $208.11 billion and GAAP EPS of $1.88. Consensus estimates called for EPS of $3.67 and revenues of $271.4 billion

Adjusted EPS excludes a benefit of $5.39 billion related to recent changes in U.S. tax law. Excluding the tax benefit and impairment charges of $1.29 billion, net income totaled $3.73 billion in the fourth quarter, down 2% year over year from $3.82 billion in the year-ago quarter.

Worldwide upstream earnings totaled $8.4 billion compared with $600 million net loss in the fourth quarter of 2016. Higher prices increased earnings by $1.2 billion. U.S. tax law changes contributed $7.1 billion of the improvement and lower asset impairments cost $847 million.

On an oil-equivalent basis, production dropped by 130,000 barrels (3%) a day year over year. Liquids production fell by 133,000 barrels a day and natural gas production slipped by 17 million cubic feet per day.

U.S. upstream (exploration and production) activities posted a net loss of $60 million, excluding the tax benefits and asset impairments. Non-U.S. upstream earnings totaled $1.3 billion, including asset impairments of $807 million and $480 million in unfavorable effects of U.S. tax law changes. Excluding these items, non-U.S. earnings totaled $2.6 billion.

In the downstream division earnings rose to $1.6 billion, up by $323 million year over year. Higher refining margins increased earnings by $250 million, while volume and mix effects decreased earnings by $190 million. All other items increased earnings by $260 million, including a tax benefit of $618 million. Petroleum product sales of 5.6 million barrels per day were 118,000 barrels per day higher than last year’s fourth quarter.

Capital spending totaled $23.1 billion in 2017, up 20% from 2016.

CEO and Chair Darren Woods said:

The impact of tax reform on our earnings reflects the magnitude of our historic investment in the U.S. and strengthens our commitment to further grow our business here. We’re planning to invest over $50 billion in the U.S. over the next five years to increase production of profitable volumes and enhance our integrated portfolio, which is supported by the improved business climate created by tax reform.

The company did not provide guidance in its press release, but analysts are expecting 2018 first-quarter EPS of $1.18 on revenues of $77.24 billion compared with EPS of $0.95 and revenues of $63.29 billion in the first quarter of 2017. For the full year, analysts are looking for EPS of $4.69 on revenues of $321.31 billion.

Third-quarter results were disappointing, and early reaction to the report underscores that view. Exxon’s shares traded down nearly 3% in Friday’s premarket at $86.56, in a 52-week range of $76.05 to $89.30. Analysts had a 12-month price target of $89.10 before this morning’s report.






​WASHINGTON (Reuters) - U.S. President Donald Trump's re-election campaign ended 2017 with $22 million in cash helped by $6.9 million in contributions in the fourth quarter of the year, his campaign announced on Wednesday.

Trump's campaign spent $2.8 million in the final quarter of the year. Of that, $1.1 million went to legal fees, about the same amount spent the previous quarter. There were no payments to a lawyer who is representing Donald Trump Jr. and previously received more than $280,000 in payments from the campaign.

The bulk of the legal spending went to the firm Jones Day, which provides the routine legal services required by the campaign.

And $1.1 million was spent on digital advertising through the firm of Brad Parscale, who ran the campaign website and online fundraising during the 2016 election. The remainder of Trump's expenses went to payroll for a small staff, travel and event costs.

Trump filed for re-election the day he took office, an unusual move for an incumbent president. Traditionally, incumbent presidents have waited until after their second year in office to begin their re-election campaign. Trump will stand for re-election in November 2020.

Trump's campaign has a joint fundraising agreement with the Republican National Committee, which accounted for about $3.5 million raised in the final quarter of the year.

More than half of the donations made directly to his campaign came from contributors who donated less than $200.

"Never before has a president's campaign committee raised so much in his first year in office, and never has a president enjoyed so much support from small donors who continue to rally around him," Lara Trump, the president's daughter-in-law and adviser to his re-election campaign, said in a statement.

At the end of former President Barack Obama's first year in office, his campaign had about $8 million in cash, most of which was left over from his previous campaign and not the product of new fundraising efforts. Obama spent about $852,000 in the last quarter of his first year in office - $2 million less than Trump spent in the same time period.

Obama did not begin running for re-election until after completing two full years in office