US Job Market Kicks Off the Year with a Boom: 517,000 New Jobs, Unemployment at 3.4%

The US job market started the year off with a bang in January, with nonfarm payrolls showing a massive 517,000 job gain. This was far above the average estimate of 185,000 jobs and the biggest gain since July 2022.[0] The unemployment rate also unexpectedly fell to 3.4%, the lowest rate since May 1969.[1] This comes despite the Federal Reserve’s efforts to slow the economy and bring down inflation by raising interest rates eight times since March 2022.

The surge in hiring was driven by job gains across a multitude of sectors. Leisure and hospitality led the way with 128,000 new jobs, followed by professional and business services (82,000), government (74,000) and health care (58,000).[2] Average hourly earnings increased 0.3% on the month and 4.4% from a year ago, slightly slower than expected.[2]

Traders increased their bets that the Fed would approve a quarter percentage point interest rate hike at its March meeting, with the probability rising to 94.5%.[2] It is anticipated that the Federal Reserve will further raise the benchmark funds rate in May or June to a range of 5%-5.25%.[3]

Despite the strong job numbers, wage growth remains lagging behind inflation, which should give the Federal Reserve confidence that inflation will continue to come down even if they end their rate hikes.[4] The slowdown in average hourly earnings should also ease inflationary pressures in the near term.[5]

The latest jobs report reflects a labor market that is still solid, despite signs of recession in parts of the economy.[6] Job growth was revised up for November and December by a total of 71,000 jobs.[7] This suggests that monetary policy works with a lag and it will take more time for the economy to feel the full effects of a 4.75% Fed policy rate.[5]

0. “January jobs report: 517,000 payrolls added, unemployment rate at 3.4%” Business Insider, 3 Feb. 2023,

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

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

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

4. “Jobs report: A recession sure doesn’t seem imminent.” Slate, 3 Feb. 2023,

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

6. “Why did we get a monster jobs report if the economy is slowing?” CNN, 4 Feb. 2023,

7. “U.S. employers added a whopping 517,000 jobs in January” NPR, 3 Feb. 2023,