Huge Increase in January Jobs, Unprecedented Since 1969
The U.S. economy added 517,000 jobs in January, far surpassing the Dow Jones estimate of a 187,000 gain. This marks the biggest increase in nonfarm payrolls since July 2022 and brought the unemployment rate down to 3.4%—the lowest jobless level since May 1969. The labor force participation rate also rose to 62.4%.
Average hourly earnings rose 0.3% in January, on par with the monthly increase in December. Over the year through January, wages are up 4.4%. However, the increase in hourly pay over the past year slowed again to 4.4% from 4.8%, indicating some relaxation in wage pressures.
Gains in leisure and hospitality, professional and business services, and health care drove widespread job growth. Employment also increased in government, partially reflecting the return of workers from a strike. Revisions to job numbers in November and December showed an increase of 71,000.
The shockingly strong monthly jobs gain bucks a trend of five consecutive months of moderating job growth during the latter half of 2022. Still, the report also showed that wage growth moderated on an annual basis.
The Fed raised interest rates by a quarter percentage point yesterday and it left the door open for future rate hikes. CME Group data showed that traders are more certain than ever that the Federal Reserve will implement a quarter percentage point rise in interest rates at the March meeting, with the likelihood now standing at 94.5%. The Federal Reserve is anticipating another hike in the central bank's benchmark funds rate in either May or June, bringing the rate to a target range of 5%-5.25%.
Federal Reserve Chairman Jerome Powell noted the labor market “remains extremely tight” and is still “out of balance.” By December, there were close to 11 million job vacancies, equating to almost two jobs per available worker.
The workweek increased to 34.7 hours, up from 34.4 hours, undoing the prior decreases. A 1.2% increase in the aggregate number of hours worked across the economy was due to a combination of a longer workweek and robust hiring. The figure is noteworthy, as the aggregate weekly hours worked had gone down in the three months before, with minor dips of 0.3% in October, 0.1% in November, and 0.1% in December.
The Federal Reserve has expressed concern that the limited labor market could eventually lead to higher wages and make it more difficult to control high inflation.
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1. “Jim Cramer says strong January jobs report shows the economy can handle more rate hikes” CNBC, 4 Feb. 2023, https://www.cnbc.com/2023/02/03/jim-cramer-says-strong-january-jobs-report-shows-the-economy-can-handle-more-rate-hikes.html
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5. “U.S. employers added a whopping 517,000 jobs in January” NPR, 3 Feb. 2023, https://www.npr.org/2023/02/03/1153912911/jobs-labor-unemployment-wages-inflation-federal-reserve
6. “The US economy added a whopping 517,000 jobs in January” CNN, 3 Feb. 2023, https://www.cnn.com/2023/02/03/economy/january-jobs-report-final/index.html
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