January Jobs Report Exceeds Expectations, Unemployment Rate Drops to 3.4%
By The U.S. economy added 517,000 jobs in January, surpassing the Dow Jones expectation of a 187,000 gain and marking the biggest increase in nonfarm payrolls since July 2022.[0] According to the Bureau of Labor Statistics, average hourly earnings rose 0.3%, or 4.4% over the previous year, while the labor force participation rate edged higher to 62.4%.[1] The unemployment rate dropped to 3.4%, the lowest level since early 1969.[2]
Job growth was seen across several industries, primarily driven by leisure and hospitality, professional and business services and health care.[3] According to the Bureau of Labor Statistics (BLS), government jobs experienced an increase, which was partially due to the return of workers from a strike.[4] Despite signs of an economic downturn, an increase in hiring has still been observed, with tech and logistics sectors experiencing a number of major job cuts and the Federal Reserve's attempts to hamper the job market by raising interest rates.[5]
The probability that the Fed will agree to a quarter percentage point rate increase at its March meeting rose to 94.5%, as traders increased their wagers, according to CME Group data.[5] It is anticipated that the Federal Reserve will further raise the federal funds rate to a target range of 5%-5.25% in either May or June.[2] In December, there were approximately 11 million job openings, which amounts to nearly two for each available worker.[6]
The Federal Reserve's aim is to bring down wage growth across the board, which appears to have been accomplished based on recent jobs reports, including the one from January. At the end of 2022, the increase in employment costs was slower than anticipated.[7] Should the Federal Reserve observe a decline in wage growth and assume economic stability, they may reduce the frequency of interest rate increases, resulting in a soft landing with no recession.
Charlie Ripley, Senior Investment Strategist at Allianz Investment Management, said “Today’s payroll number is certainly a head-scratcher for most market participants as the 517,000 gain was well above estimates along with the unemployment rate going the opposite direction the Fed would like to see.[8] As expected, most of the job additions are coming from the service sector and particularly the leisure and hospitality sector.[9]
0. “US jobs surge catches everyone off-guard” ING Think, 3 Feb. 2023, https://think.ing.com/articles/us-jobs-surge-catches-everyone-off-guard/
1. “U.S. economy adds whopping 517,000 jobs in latest report” Axios, 3 Feb. 2023, https://www.axios.com/2023/02/03/us-economy-january-jobs-report-2023
2. “Hot January Jobs Report Presents Puzzle for Investors” Morningstar, 3 Feb. 2023, https://www.morningstar.com/articles/1135270/hot-january-jobs-report-presents-puzzle-for-investors
3. “Gold prices taking a hit after U.S. economy added 517K jobs in January” Kitco NEWS, 3 Feb. 2023, https://www.kitco.com/news/2023-02-03/gold-prices-taking-a-hit-after-U-S-economy-added-517K-jobs-in-January.html
4. “Job growth surges in January, reversing slowdown trend of past months” Fox Business, 3 Feb. 2023, https://www.foxbusiness.com/personal-finance/job-growth-surges-january
5. “U.S. added 517,000 jobs in January as employers drove unexpected hiring surge” NBC News, 3 Feb. 2023, https://www.nbcnews.com/business/business-news/us-added-517000-jobs-january-much-better-187000-expected-rcna68977
6. “Jobs report shows increase of 517,000 in January, crushing estimates, as unemployment rate hit 53-year low” CNBC, 3 Feb. 2023, https://www.cnbc.com/2023/02/03/jobs-report-january-2023-.html
7. “How is the economy doing? Kind of good, actually.” Vox.com, 3 Feb. 2023, https://www.vox.com/the-goods/2023/2/3/23584939/jobs-report-economy-federal-reserve-inflation-recession-jay-powell
8. “Jobs Report Shows Massive Hiring in January: What the Experts Are Saying” Kiplinger's Personal Finance, 3 Feb. 2023, https://www.kiplinger.com/investing/jobs-report-shows-massive-hiring-in-january-what-the-experts-are-saying
9. “Jobs report: ‘Certainly a head scratcher,' Wall Street analysts react” Yahoo News, 3 Feb. 2023, https://news.yahoo.com/jobs-report-certainly-a-head-scratcher-wall-street-analysts-react-193000504.html
