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    US Job Market Unexpectedly Surges Despite Fed Tightening and Layoffs


    The U.S. economy added an impressive 517,000 jobs in January, defying the Dow Jones estimate of a 187,000 gain, according to the Bureau of Labor Statistics data released on Friday.[0] This marked the biggest increase in nonfarm payrolls since July 2022.[1] The unemployment rate fell to 3.4%, the lowest level since early 1969, compared to the estimate for 3.6%.

    Average hourly earnings rose 0.3%, in line with the estimate, and 4.4% from a year ago, 0.1 percentage point higher than expectations though a bit below the December gain of 4.6%.[2] Growth in employment across many industries contributed to the impressive result, surpassing expectations.[3] The leisure and hospitality industry, which experienced a lot of job losses at the start of the pandemic and has been working hard to fill positions, added 128,000 jobs in January, more than any other sector.[3] Professional and business services saw a notable increase of 82,000 jobs, while government and health care both rose by 74,000 and 58,000 positions respectively.[2] Retail experienced an increase of 30,000, while construction increased by 25,000.[2]

    Despite the evidence of economic downturn in certain areas, a considerable increase in employment has occurred, as well as a few notable job cuts in the tech and logistics industries. Additionally, the Federal Reserve has taken action to suppress the labor market by raising interest rates significantly.[4] The Federal Reserve has implemented an eightfold increase in its benchmark interest rate since March 2022, the latest of which was a 0.25% rise on Wednesday.[5]

    Data from CME Group revealed that traders are more likely to believe the Federal Reserve will approve a 0.25% interest rate hike at the March meeting, with the probability now at 94.5%.[3] It is anticipated that there will be an additional rise of the central bank's benchmark funds rate in the period of May-June, leading to a target range of 5%-5.25%.[2]

    Despite the Federal Reserve's tight monetary policy, which drove the central bank's benchmark interest rate this week to its highest level since 2007, there was a surprising increase in payrolls.[6]

    Contrary to predictions of an increase to 3.6%, the unemployment rate in last month dropped to 3.4%, the lowest it has been since 1969, due to a number of corporate layoffs. Average hourly wage rose 0.3% on the month, as expected.[7] Wage growth on an annual basis decreased to 4.4%, as predicted.[8]

    It is widely thought by economists that the U.S. will experience a “soft landing” scenario.

    0. “Labor Market Added 517,000 Jobs In January—Unemployment Rate Falls To 54-Year Low Of 3.4%” Forbes, 3 Feb. 2023,

    1. “Jim Cramer says strong January jobs report shows the economy can handle more rate hikes” CNBC, 4 Feb. 2023,

    2. “Jobs report shows increase of 517,000 in January, crushing estimates, as unemployment rate hit 53-year low” CNBC, 3 Feb. 2023,

    3. “U.S. added 517,000 jobs in January as employers drove unexpected hiring surge” NBC News, 3 Feb. 2023,

    4. “Jobs Report Shows Massive Hiring in January: What the Experts Are Saying” Kiplinger's Personal Finance, 3 Feb. 2023,

    5. “U.S. jobs report January: 517,000 jobs added despite recession fears” USA TODAY, 3 Feb. 2023,

    6. “Here’s where the jobs are for January 2023 — in one chart” CNBC, 3 Feb. 2023,

    7. “Jobs report: U.S. economy adds 517,000 jobs in January, unemployment rate falls to 3.4% as labor market stuns” Yahoo News, 3 Feb. 2023,

    8. “Jobs Report: Hot Hiring, Lower Jobless Rate Lift Fed Rate-Hike Odds; S&P 500 Falls” Investor's Business Daily, 3 Feb. 2023,

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