The U.S. economy added 517,000 jobs in January, according to a report from the Bureau of Labor Statistics, and the unemployment rate fell to 3.4%, its lowest level since 1969.[0] This marked a significant improvement from the December report, which showed 260,000 jobs added.[1] The January job gains were widespread across sectors, with leisure and hospitality, professional and business services, health care, government, retail, and construction leading the way.[2]
Average hourly earnings also rose 0.3% on the month, in line with the estimate, and 4.4% from a year ago, slightly higher than expectations.[3] This wage growth has been moderating in recent months, a trend that is likely to continue as the labor market remains tight and the demand for workers outpaces supply.[4]
In response to the latest jobs report, the Federal Reserve raised interest rates by a quarter percentage point to a range of 4.50-4.75%.[5] This was the eighth rate hike since March of last year, and a signal that the central bank is still taking an aggressive stance on inflation. Market expectations are now in favor of another quarter-point increase at the March meeting, and another increase in May or June that would bring the federal-funds rate to a target range of 5%-5.25%.[6]
The strong jobs report and the Fed’s move to raise interest rates have some economists worried that the central bank may be tightening too much, driving the economy into a recession. However, average hourly earnings remain relatively low and inflation is still below the Fed’s 2% target, which should give the central bank more confidence that inflation will continue to come down even if rate hikes are brought to an end.[7]
Overall, the January job report was surprisingly strong and indicates that the U.S. economy is still on a positive trajectory, despite the Fed’s rate hikes. The strong job growth and low unemployment rate should continue to boost consumer spending and confidence, leading to further economic growth.
0. “Jobs report blows by expectations, ratchets up inflation fight” Deseret News, 3 Feb. 2023, https://www.deseret.com/2023/2/3/23584433/jobs-report-exceeeds-expectations-amid-inflation-lowest-unemployment
1. “Can a Seasonal Adjustment to Lost Jobs Justify a Tighter Fed?” Cato Institute, 6 Feb. 2023, https://www.cato.org/blog/can-seasonal-adjustment-lost-jobs-justify-tighter-fed-3
2. “Blowout Jobs Report a Boon for These 5 Staffing Stocks” Yahoo Finance, 9 Feb. 2023, https://finance.yahoo.com/news/blowout-jobs-report-boon-5-125912663.html
3. “Jobs Report: Hot Hiring, Lower Jobless Rate Lift Fed Rate-Hike Odds; S&P 500 Falls” Investor’s Business Daily, 3 Feb. 2023, https://www.investors.com/news/economy/jobs-report-hiring-surges-as-jobless-rate-falls-sp-500-futures-lower/
4. “How is the economy doing? Kind of good, actually.” Vox.com, 8 Feb. 2023, https://www.vox.com/the-goods/2023/2/3/23584939/jobs-report-economy-federal-reserve-inflation-recession-jay-powell
5. “Booming Job Gains Could Fuel Fed Debate Over Whether More Is Needed to Corral Inflation” The Wall Street Journal, 4 Feb. 2023, https://www.wsj.com/articles/booming-job-gains-keep-the-fed-on-track-to-push-rates-higher-11675449424
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. “Jobs report: A recession sure doesn’t seem imminent.” Slate, 3 Feb. 2023, https://slate.com/business/2023/02/jobs-report-hiring-economy-federal-reserve-biden.html