U.S. Job Market Defies Expectations with Biggest Increase Since July 2022
The U.S. economy added 517,000 jobs in January, defying expectations and marking the biggest increase in nonfarm payrolls since July 2022. The unemployment rate fell to a 54-year low of 3.4%, the government said Friday. Average hourly earnings rose 0.3%, yielding an annual wage growth of 4.4%.
These figures indicate that the U.S. labor market is proving to be remarkably resilient, in spite of the Federal Reserve’s attempts to cool the economy and bring down inflation through eight rate hikes since March 2022.
However, wage growth has moderated on an annual basis, with average hourly earnings falling 0.4 percentage points to 4.4%, indicating some relaxation in wage pressures. Job gains for November and December were also revised up by a total of 71,000, suggesting that the job gains of 2021 were even stronger than initially reported.
Leisure and hospitality, one of the industries hardest hit by the pandemic, added 128,000 jobs in January, leading all sectors. Professional and business services, government, and health care saw significant gains of 82,000, 74,000, and 58,000 respectively. Retail experienced an increase of 30,000, while construction saw an additional 25,
Federal Reserve Chairman Jerome Powell noted this week that the labor market “remains extremely tight” and is still “out of balance”, with about 11 million job openings, or just shy of two for every available worker.
The strong job growth presents a dilemma for the Fed in its efforts to cool down the labor market and hit its inflation goals. Daniel Zhao, lead economist for job review site Glassdoor, said: “Today’s report is an echo of 2022’s surprisingly resilient job market, beating back recession fears. The Fed has a New Year’s resolution to cool down the labor market, and so far, the labor market is pushing back.
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1. “Jobs report shows blowout 517,000 gain in U.S. employment in January” MarketWatch, 3 Feb. 2023, https://www.marketwatch.com/story/u-s-adds-517-000-new-jobs-in-january-in-sign-labor-market-still-strong-11675431419
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5. “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
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