(Bloomberg) -- U.S. companies created 151,000 jobs in January, a disappointment compared to the economist consensus leading up to the report. That's bad news for anyone still holding out hope that the Federal Reserve will hike rates again in March, right?

Not exactly. Here are three things in Friday's employment release that will give Janet Yellen and her Fed colleagues some encouragement that the domestic economy is still making steady progress:


Most obviously, the jobless rate dropped in January to 4.9%, matching the Fed's median forecast for the long-run sustainable level of unemployment - or "full employment" - and continuing the most impressive trend in U.S. economic data. When Yellen appears twice before congressional committees next week, she will almost certainly highlight the progress made in getting Americans back to work since October 2009, when unemployment hit 10%. 


Perhaps even more encouraging was the move in the labor force participation rate. The share of the working-age population that was either employed or looking for a job ticked up to 62.7% in January from 62.6% the month before. From a year earlier, some 1.31 million people have entered the labor force.

Gazing back to October 2013, the participation rate has declined a mere 0.1% point in the last 27 months. Given the steady erosion that aging is having on that ratio, a leveling of participation over that period of time can only be viewed as a victory at the Fed.

Moreover, one could argue the numbers vindicate Yellen's repeated argument that moving very slowly with monetary policy normalization could help draw back into the workforce a meaningful number of people who had dropped out entirely during the recession. Many economists had argued that most of them were lost for good, and this looks like evidence to the contrary.


Then there's wages. Economists have been puzzling for months over why big gains in employment have done little to elevate wages, and Fed officials have looked longingly in that direction for help in getting inflation closer to their 2% target.

Average hourly earnings rose by a more-than-expected 2.5% in January from the year before. Wages for the year through December were revised upward to 2.7%, the highest level since July 2009.

Taken together, the report was "somewhat hawkish for the Fed, given the move down in the unemployment rate and the move up in wages," Michael Feroli, chief U.S. economist at JPMorgan Chase in New York, said. Feroli believes the Fed still wouldn't raise rates if it were meeting tomorrow.

Yet the Fed is charged with striving to manage unemployment and inflation, and Friday's report points in the right direction on both counts.

"The report unequivocally supports the Federal Reserve’s (and our) baseline view that further gradual rate hikes are warranted," Harm Bandholz, chief U.S. economist at Unicredit Bank in New York, wrote in a note to clients. "A falling unemployment rate and faster wage gains also mean that the Fed is getting closer to meet both of its mandates."

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