- Hiring in the US surges in January with 353,000 jobs added, showcasing a resilient labor market unbothered by high interest rates and financial strains on households.
- Payroll increases in health care and professional services contribute to the unexpectedly strong showing, while revisions to job gains in November and December indicate a stronger labor market than previously believed.
- Average hourly pay rises by 19 cents to $34.55, resulting in a yearly increase of 4.5%, potentially influencing the Federal Reserve’s decision on interest rate cuts.
Additional Coverage:
- Despite high-profile layoffs, January jobs report shows hiring surge, low unemployment (usatoday.com)
Hiring in the United States experienced a significant surge in January, with employers adding a robust 353,000 jobs. This illustrates a resilient labor market that is not being deterred by high interest rates and financial strains on households. The unemployment rate remained steady at 3.7%, according to the Labor Department. Economists had estimated an addition of 185,000 jobs for the month.
The unexpectedly strong showing can be attributed to substantial payroll increases in health care and professional services, as well as some unique factors related to holiday hiring that may not persist in the upcoming months. However, this performance is not a one-time event. Job gains for November and December were revised upward by a remarkable 126,000, with December’s tally being upgraded from 216,000 to 333,000. These changes indicate a stronger labor market in the fall than previously believed.
“The revision of last month’s numbers added to today’s report make clear the economy is breaking new ground,” says Jane Oates, president of WorkingNation.
Average hourly pay also experienced a significant rise, increasing by 19 cents to $34.55, resulting in a yearly increase of 4.5%. Since last spring, wage increases have outpaced inflation, providing consumers with more purchasing power.
The impressive job and wage gains could make the Federal Reserve more hesitant to cut interest rates anytime soon. While the Fed plans to lower rates three times this year, officials have signaled that a March cut is unlikely in order to gauge the long-term impact of inflation related to the pandemic. Economists do not expect the Fed to start reducing rates until the third quarter.
However, other experts are still betting on a rate cut in May. Fed Chair Jerome Powell stated that a strong economy and job market can coexist with easing inflation, and cutting rates would not be discouraged as long as price increases continue to slow. The focus for the Fed will primarily be on whether inflation reports over the next few months show a continued slowdown.
In terms of job sectors, professional and business services led the gains in January with 74,000 jobs added. Health care saw an increase of 70,000 jobs, retail added 45,000, social assistance added 30,000, and manufacturing added 23,000 jobs. Federal, state, and local governments added a total of 36,000 jobs. In recent months, industries less sensitive to rate increases and economic fluctuations have accounted for the majority of job growth, including government, health care, and social assistance. However, last month saw broader-based job gains with professional services and manufacturers hiring a significant number of workers.
One notable weakness in the report was that the average workweek decreased from 34.3 hours to 34.1 hours, the lowest since the height of the pandemic. It is unusual for employers to reduce hours while simultaneously adding employees. Some speculate that businesses are still recovering from severe labor shortages caused by the pandemic and are reluctant to let workers go, even if their sales are struggling. This surplus of employees may result in fewer hours per worker on average, indicating a potential slowdown in hiring in the coming months.
Weather conditions also played a role in the January employment figures. Cold and snowy weather in the Northeast and Midwest likely dampened employment in industries such as construction and restaurants. On the other hand, unseasonably warm weather in December boosted employment, leading to a decline in January as temperatures returned to normal. Additionally, retailers, hotels, and trucking companies hired fewer holiday workers than usual in late 2023, resulting in fewer layoffs in January and an increase in employment on a seasonally adjusted basis.
Looking ahead, Moody’s Analytics predicts that consumer spending and job growth will significantly slow down this year due to high interest rates, record credit card debt, persistent inflation, and dwindling pandemic savings. They expect the U.S. to add an average of 72,000 jobs per month, a decline from the 255,000 jobs added last year and the 399,000 in 2022. Some economists even predict a mild recession in 2024, as evidenced by recent layoffs announced by tech giants like Amazon, Microsoft, and Google. However, most forecasters believe the nation will avoid a downturn, as these same companies are also hiring for other areas such as artificial intelligence and machine learning.