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The U.S. economy added more than half a million jobs in January, a staggering number that pushed the unemployment rate down to its lowest level in half a century.
The Bureau of Labor Statistics said Friday that job gains were widespread, with leisure and hospitality, professional and business services, health care, retail, construction and government all adding to the workforce. The oil and gas, IT and financial services sectors were generally flat, but none of the sectors lost jobs.
The job gain was more than double the 197,000 that economists had expected. This was also enough to push the unemployment rate up to 3.4 percent. This is the lowest record since 1969.
January’s numbers were even better than the torrid pace seen in 2022, where the average US economy added 375,000 new jobs per month.
The January total means that there are currently only 5.6 million people in America classified as officially unemployed, meaning of working age, looking for work but not getting one.
Inflation concerns remain
Average hourly wages rose 10 cents for the month to $33.03. That’s an increase of 4.4 percent in a year, but still less than the rate of inflation.
A buoyant labor market is good news for workers, but it paradoxically suggests that inflation is likely to remain high. The US central bank, the Federal Reserve, has raised interest rates aggressively in recent months in an attempt to curb inflation, but so far, all it has managed to do is reduce the annual rate from eight percent to six percent.
The strong job numbers suggest that the Fed may be thinking it needs to do more. Before the numbers came out, investors in the financial instrument known as swaps thought there was an 80 percent chance the Fed would raise rates again at its next meeting.
After the data came out, that probability increased to more than 90 percent.
Economist Royce Mendes with Desjardins said the numbers show January was “an absolutely monster month for hiring.”
“We were more confident on the call that the Fed would continue to raise rates in the next two meetings,” he said.
Bank of Montreal economist Sal Guatieri said the number was “speakless.”
“It’s hard to know what’s going on because the company is hoping for at least a drop,” he said. “Not laying off employees due to shortages is one thing, but counting your staff is another.”
He thought the February data could show the start of a slowdown, however, as numbers from public records showed US companies announced more than 100,000 layoffs during the month.
“However, today’s report casts serious doubt on whether the economy is slipping into recession,” he said.
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