January Jobs ReportPace of U.S. Hiring Surges Unexpectedly

U.S. employers added 517,000 jobs in January.

Monthly change in jobs

+750,000 jobs

+517,000

in January

+500,000

+250,000

Jan.

’22

April

July

Oct.

Jan.

’23

+750,000 jobs

+517,000

in January

+500,000

+250,000

Jan. ’22

April

July

Oct.

Jan. ’23

Data is seasonally adjusted.

Source: Bureau of Labor Statistics

The American labor market unleashed a burst of hiring in January, producing another wave of robust job growth even as interest rates continue to rise.

Employers added 517,000 jobs on a seasonally adjusted basis, the Labor Department said on Friday, an increase from 260,000 in December.

Underscoring the labor market’s extraordinary vibrancy was the unemployment rate, which fell to 3.4 percent, the lowest since 1969.

Even as businesses across the country hired with unexpected zeal, wage growth slowed slightly to 0.3 percent compared with December, an indication that some of the pressure to lure employees with pay raises may be easing.

Still, the hefty hiring figures defied expectations and underscored the challenges facing the Federal Reserve, which is trying to cool the labor market in its effort to tame rapid inflation. By raising interest rates — on Wednesday, Fed officials did so for the eighth time in a year — policymakers hope to force businesses to pull back on their spending, including hiring.

Yet the labor market has remained extraordinarily tight. In addition to the report on Friday, the government released data this week showing that the number of posted jobs per available unemployed worker — a measure that policymakers have been watching closely — rose again in December. And despite a cavalcade of layoffs in the technology sector, the overall number of pink slips has stayed extremely low.

“So much for moderation,” said Beth Ann Bovino, the chief U.S. economist at S&P Global Ratings. “We certainly didn’t see it in this report.”

The job growth was broad, including in some industries that economists had expected to show signs of slowing. Employers in leisure and hospitality, including restaurants and bars, brought on a bevy of workers.

The monthly jobs report is based on two surveys, one of households and one of employers.

The labor force participation rate was barely changed at 62.4 percent. Fed officials have been hoping to see an increase in the ranks of those available to work, which could alleviate the tightness in the labor market that is driving up wages and contributing to inflation.

Participation in the work force is still well below prepandemic levels

Share of people who are in the labor force (employed, unemployed but looking for work or on temporary layoff)

63%

62.4%

62

61

60

2019

2020

2021

2022

2023

63%

62.4%

62

61

60

2019

2020

2021

2022

2023

Data is seasonally adjusted.

Source: Bureau of Labor Statistics

By Ella Koeze

The information sector lost 5,000 jobs, a relative blip despite headline-grabbing news of layoffs at technology giants such as Microsoft and Google.

At the same time, some measures suggest that higher interest rates appear to be slowing other parts of the economy. Transactions in the housing market, which is particularly sensitive to rate increases, plummeted last year as relatively high mortgage rates made purchases too expensive for many would-be homeowners. Consumer spending fell at the end of last year, a sign that Americans were becoming more cautious in the face of rising prices, dwindling savings and fears of recession.

Many forecasters expect the labor market to also slow this year as the Fed’s rate moves filter through the economy.

Strong hiring hints at more work ahead for the Fed, but wages cool.

Federal Reserve officials have said that they are looking for the labor market to cool as they assess how much more they need to do to slow the economy, and the job report on Friday suggested that policymakers may still have a ways to go.

Employers hired ravenously in January, the jobless rate dipped to a level not seen since 1969 and the average workweek ticked up — all signs that demand for labor is booming.

At the same time, though, wage growth continued to moderate. Average hourly earnings climbed by 4.4 percent over the year, more than forecast in a Bloomberg survey of economists but less than 4.8 percent in December. Pay growth has been decelerating for months, though it remains faster than is typical and is still notably quicker than the pace that Fed officials have at times suggested would be consistent with their 2 percent inflation goal.

Wage growth is slowing along with inflation

Year-over-year percentage change in earnings vs. inflation

+8%

CONSUMER

PRICE INDEX

+6.5%

in Dec.

+6

AVG. HOURLY

EARNINGS

+4.4%

in January

+4

+2

2019

2020

2021

2022

2023

+8%

CONSUMER

PRICE INDEX

+6.5%

in Dec.

+6

AVG. HOURLY

EARNINGS

+4.4%

in January

+4

+2

2019

2020

2021

2022

2023

Data is seasonally adjusted.

Source: Bureau of Labor Statistics

By Ella Koeze

Fed officials raised interest rates by a quarter-point this week, and Wall Street is now waiting to see how high officials will ultimately push borrowing costs and how long they will stay elevated. Taken as a whole, the jobs data offered something of a mixed bag for the Fed, which could choose to focus on either the slowing pay gains or the rapid hiring and falling unemployment rate.

But officials have recently stressed that labor demand remains too strong, so the fresh hiring figures offered little comfort on that front. And policymakers may question whether wage growth can continue to slow with unemployment so low and employers so eager to snap up workers.

“The risks are now that they might need to do more,” Kathy Bostjancic, Nationwide’s chief economist, wrote in a note following the release.

Central bankers usually cheer on workers when they get jobs and raises, but they are worried that today’s strong job market could stop inflation from cooling completely. When companies increase pay rapidly to compete for a limited pool of workers, they may charge more to cover their climbing labor bills. Beyond that, higher incomes could prompt consumers to spend more, keeping demand strong.

“The labor market continues to be out of balance,” Jerome H. Powell, the Fed chair, said earlier this week.

Mr. Powell said this week that the Fed would be watching economic data ahead of its next policy meetings, in March and May. And he underlined that if the labor market did not cool more, inflation could remain rapid in the services sector, in which labor is a major cost.

“My own view would be that you’re not going to have a — you know, a sustainable return to 2 percent inflation in that sector without a better balance in the labor market,” he said at his news conference. “And I don’t know what that will require in terms of increased unemployment.”

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Leisure and hospitality employers led the outsized January gains.

Change in jobs in January 2023, by sector

Leisure and

hospitality

+128,000 jobs

+105,000

Education and health

Business

services

+82,000

+74,000

Government

+30,100

Retail

+25,000

Construction

+19,000

Manufacturing

Leisure and hospitality

+128,000 jobs

Education and health

+105,000

Business services

+82,000

Government

+74,000

Retail

+30,100

Construction

+25,000

+19,000

Manufacturing

Data is seasonally adjusted.

Source: Bureau of Labor Statistics

January’s bumper crop of jobs was widespread across industries, but a few stood out, exceeding their 2022 average growth rates.

Employers in leisure and hospitality, which had registered a big jump in job openings in December, added 128,000 positions. The sector had the most jobs to regain after the pandemic lockdowns, and remains 2.9 percent below its level in early 2020, or nearly half a million jobs. Restaurants alone grew by 99,000 workers.

Professional and business services, whose hiring had been decelerating in recent months, posted a gain of 82,000 jobs. Fields like technical consulting powered the increase, as did a reversal in the half-year decline in temporary help services.

The public sector, which has struggled to hire as government salaries fell behind the swift wage gains in private industry, added 74,000 jobs — although nearly half of those reflected the end of a strike by University of California staff members, the Labor Department noted. Government payrolls remain nearly 500,000 below their prepandemic level.

After a very slow 2022, retail businesses grew by 30,000 jobs. That number is probably somewhat unreliable, however, given volatile seasonal factors that have been thrown off even more by the pandemic.

Another ongoing surprise: employment in construction, which has slowed sharply as rising interest rates have made it difficult to finance home building. The sector added 25,000 jobs in December, mostly in specialty trade contractors.

And the health care industry continued its strong gains, adding 58,000 jobs in January. That included 17,400 jobs in nursing and residential care facilities, which have been slow to hire as workers and elderly residents have avoided congregant care settings.

January’s job growth is a boost for Biden.

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President Biden pointed to rapid job growth and falling consumer prices as evidence that his economic agenda is working.CreditCredit...Kenny Holston/The New York Times

PHILADELPHIA — President Biden on Friday seized on what he called “strikingly good news” about the economy, hailing the addition of a half-million jobs and capping a week of presidential swagger about the direction of the country.

Just days before he delivers his second assessment of the State of the Union in an address before Congress next week, Mr. Biden has all but dropped the “I feel your pain” message he frequently delivered last year as inflation soared.

Instead, Mr. Biden traveled around the country this week, pointing to the real-world impact of legislation he championed to spend billions of dollars on the nation’s crumbling infrastructure and unabashedly taking credit for what he is betting will be a lasting turnaround as the Covid-19 pandemic wanes.

In Philadelphia, Mr. Biden boasted about the new bridges that will be built and rusty lead pipes that will be replaced because of his efforts. And he praised the country’s businesses for creating 12 million jobs since he took office.

“There’s now 12 million more Americans who can look at their kid and say: ‘It’s going to be OK,’” he told a group of workers at a water treatment plant. “And what it’s done mostly is to provide dignity for those families.”

But looking on the bright side has its risks, especially since the red-hot job growth in January has the potential to trigger more aggressive interest rate hikes from the Federal Reserve as it tries to keep a lid on high inflation. Prices have still risen at a rate of 6.5 percent, down from last year but well above the average for the last several decades.

And economic uncertainty is far from gone as Republicans threaten not to raise the debt limit later this year, a move that economists say would shatter global financial confidence and plunge the nation into recession.

Previous presidents who have been too rosy about the economy have been punished by voters who see them as out-of-touch with their real-life issues. President George Bush lost his re-election bid in 1992 after seeming to dismiss the impact of an inflation-driven recession on middle-class workers.

“This is the hardest thing to do in politics,” said James Carville, the Democratic strategist who helped Bill Clinton defeat Mr. Bush that year. “In a recovery, when can you say there’s a recovery and things are good? When people don’t think it’s good and you say it’s good, they get angry with you.”

That same dynamic hurt Mr. Clinton politically in 1994, Mr. Carville recalled.

“Although the economy was doing better, if we said it, the blowback was: ‘The guy is out of touch,’” he said. “That’s the most difficult and vexing problem that any incumbent has.”

The White House has also been anxious over a worker shortage as Mr. Biden focuses on the implementation of his infrastructure, economic and climate legislation this year to galvanize voters. The labor market has remained tight; data released this week showed that the number of posted jobs per available unemployed worker rose again in December.

But Mr. Biden and his team appear to have decided that it is not a time to hold back.

The United States added 517,000 jobs in January alone, the Labor Department said on Friday, and the unemployment rate fell to 3.4 percent, the lowest rate of joblessness since before the first moon landing in the summer of 1969.

The 12 million jobs added since Mr. Biden took office amount to “the strongest two years of job growth in history — by a long shot,” Mr. Biden crowed in remarks at the White House, adding that the new jobs report proves that a “chorus of critics” were just plain wrong about his approach to the economy.

Those critics often note that the dramatic job growth during Mr. Biden’s term is the result of needed rebuilding after the loss of about 10 million jobs in the country because of pandemic-related shutdowns.

Just moments after Friday’s jobs report came out, members of Mr. Biden’s team took to social media. Shalanda Young, the president’s budget director, noted the unemployment rate, saying “@POTUS’s economic plan is delivering.” Ian Sams, the spokesman for the White House Counsel’s Office, criticized Republicans for “political stunt” investigations.

“House Rs could instead join @POTUS to focus on issues affecting people’s lives like jobs & work together on this historic progress,” he wrote alongside a chart showing the decline in the unemployment rate since Mr. Biden took office.

The president and his team are unlikely to get that kind of cooperation from his adversaries, especially after an announcement on his likely re-election bid, a move expected in the coming weeks or months.

Despite his administration’s accomplishments, Mr. Biden remains in a politically perilous situation with voters after two years in office. A recent public opinion survey by NBC News indicated that a plurality of voters do not think he is “honest and trustworthy,” has the “ability to handle a crisis,” is “competent and effective,” or is “uniting the country.”

In the survey, 54 percent said Mr. Biden does not have the “necessary mental and physical health to be president.” Only 28 percent said he does.

Still, the president’s aides are betting that voters will be more focused on how they experience the economy: Do they have jobs? Can they afford to buy groceries and gas? Do they have the resources to take a vacation or buy a car?

A year ago, with gas prices soaring, Mr. Biden went out of his way to make sure Americans knew he felt their financial frustration with the situation, saying “I get it,” and adding: “I know how much it hurts.”

On Friday, that sentiment was largely replaced by an unrestrained enthusiasm in the wake of one of the biggest employment increases in months.

Mr. Biden has for months pointed to job growth as evidence that his agenda has rebuilt the economy after the coronavirus pandemic shuttered much of the United States. On Friday, he amplified that narrative to draw a contrast between what he says are policies that produced steady growth and the tax and spending plans of some House Republicans.

Throughout his time in office, rising consumer prices have been one of the more glaring political vulnerabilities for Mr. Biden. The Fed on Wednesday raised interest rates for an eighth consecutive time in a year in an effort to cool rapid inflation.

Republicans have accused the White House of worsening inflation by injecting too much money into the economy and have called for major spending cuts.

Asked after his remarks whether he takes responsibility for inflation that remains high, Mr. Biden said he does not.

“Because it was already there,” he said. “When I got here, man. Remember what the economy was like? Jobs were hemorrhaging. Inflation was rising? We weren’t manufacturing a damn thing here. We were in real economic difficulty.”

“That’s why I don’t,” he said.

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Wall Street slips as investors interpret surprising labor trends.

S&P 500

Oct. 30

Oct. 31

4,140

4,150

4,160

4,170

4,180

4,190

Data delayed at least 15 minutes

Source: FactSet

By: Ella Koeze

Stocks fell on Friday after the government reported a big jump in hiring last month, defying expectations for a slowdown and forcing investors to weigh the surprisingly strong labor market against their hopes that the fight against inflation could be approaching an end.

Friday’s trading reflected the push-and-pull in markets in recent months, turbulence that has come amid competing narratives about the prospects for inflation, growth and interest rates. The S&P 500 initially fell after the jobs numbers were released, then regained almost all the lost ground later in the morning, before tumbling again in the afternoon.

The index ended the day down 1 percent, while the tech-heavy Nasdaq composite slid 1.6 percent. Despite Friday’s losses, the S&P 500 gained 1.6 percent for the week, while the Nasdaq composite gained 3.3 percent.

The Federal Reserve is trying to tamp down inflation by raising interest rates, without going so far that it pushes the economy into a recession. Higher rates raise borrowing costs for consumers and companies, which investors have seen as bad for stocks. On Wednesday, Jerome Powell, the Fed chair, said the central bank would continue to raise rates until inflation was under control, adding that “a couple more” rate increases were being discussed.

But the jobs data released Friday showed a still-hot labor market, with U.S. employers adding 517,000 positions on a seasonally adjusted basis, an increase from 260,000 in December and more than twice what economists had expected. The unemployment rate fell to 3.4 percent, its lowest level since 1969.

“In order for inflation to come all the way down, one of the things that needs to happen is the labor market needs to weaken,” said Edward Moya, senior market analyst at OANDA.

While the employment numbers are a testament to the continued strength of the economy, the labor market has also been stoking inflation. Demand for workers has pushed up wage growth and, in turn, increased prices for consumers. In January, average hourly earnings rose 4.4 percent from a year earlier, a slowdown in the pace of gains from December but still higher than what the Fed had suggested it would be comfortable with.

The government also released data this week showing that the number of posted jobs per available unemployed worker — a measure that policymakers have been watching closely — rose again in December.

“These strong job numbers, while very good for the economy, adds to this concern that inflation and higher prices are going to continue to be an issue,” said Eric Beiley, executive managing director of Steward Partners Global Advisory.

An ideal situation for stock investors would be a strong labor market that wasn’t accompanied by rapidly rising prices. That would spur consumer spending and bolster corporate profits.

The broad market was also weighed down Friday by drops in shares of several large technology companies, after their earnings reports earlier in the week. Amazon tumbled 8.4 percent, after it reported on Thursday almost no profit for the latest quarter. Alphabet dropped 2.8 percent after reporting its fourth consecutive decline in profit amid a slowdown in digital advertising.

Meta, which had its biggest rally in almost 10 years on Thursday, the day after the company beat analysts’ expectations for revenue in its latest quarterly earnings report, fell about 1.2 percent on Friday. Shares of Apple were up about 2.4 percent.

Beyond the stock market, trading in government bond yields showed investors adjusting their expectations for interest rates. The yield on the 10-year Treasury note, a benchmark for mortgages and many other types of loans, rose to 3.53 percent, retracing some of this year’s decline. And the yield on the two-year note, which closely tracks expectations for Fed policy, jumped to 4.30 percent.

Revisions show even bigger job gains in 2021 and 2022 than previously reported.

The job market’s recovery from the pandemic recession has been remarkably strong. Revised data suggests it may have been even stronger than initially established.

The U.S. economy added a record 7.1 million jobs in 2021, nearly 400,000 than previously reported, the Labor Department said Friday. Last year, there were 4.6 million jobs added, nearly 200,000 more than initially reported, and the second most since records began in 1939.

The revisions were a result of an annual process in which government economists reconcile monthly jobs figures, which are based on a survey of employers, with more accurate — but less timely — data derived from state unemployment insurance systems. In most years, the adjustments are relatively small, but they can be larger during periods of rapid change in the economy, when surveys struggle to account for businesses that are starting up, shutting down or expanding into new areas.

Beyond the headline figures, the updated data reveals significant differences to some of the industries most affected by the pandemic. The leisure and hospitality sector has added over 400,000 more jobs since the start of the pandemic than previously reported, although it still has nearly half a million fewer workers than before the pandemic. Warehouses and transportation companies have added over a quarter-million more jobs than shown in earlier data. Retailers, meanwhile, have hired more than 200,000 fewer workers than previously reported.

There will be more changes to come, possibly in the opposite direction. The revisions released on Friday incorporate the more accurate unemployment insurance data only through the first three months of last year. More recent data suggests that the Labor Department’s survey may have overstated job growth in the second quarter of last year, according to an analysis by economists at the Federal Reserve Bank of Philadelphia. That data won’t be incorporated into the official jobs figures until next year’s annual revisions, however.

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