US Job Growth Surges, Unemployment Drops Further
By Robert Willis
February 4, 2023 - The US economy generated nearly three times more nonfarm jobs in January than analysts expected as the jobless rate pushed to new lows, suggesting the Federal Reserve has more work to do to quash demand and bring down inflation.
The US economy generated 517,000 nonfarm payrolls in January, compared with analysts' estimates of about 190,000 jobs, following upwardly revised gains of 260,000 in December and 290,000 for November, the Bureau of Labor Statistics said today. The average monthly gain in 2022 was 401,000 jobs.
The unemployment rate fell to 3.4pc, the lowest since 1969, from 3.5pc in December.
The stronger-than-expected employment report presents a new challenge for the Federal Reserve, which on Wednesday hiked its target rate by a quarter point, the smallest increase since last March, as it cited signs of easing inflation. It reiterated that "ongoing increases" in the fed funds rate were likely, but Fed chief Jerome Powell's comments that "the disinflationary process" is underway gave investors hope the Fed may be close to pausing.
"Goodbye to the March Fed pause," Pantheon Macroeconomics chief economist Ian Shepherdson headlined his analysis after the report. "We now think the Fed is more likely than not to hike in March, though we hope they don't, given the lagged effect of their previous tightenings is still to come."
Job growth was led by gains in leisure and hospitality, professional and business services, and health care. Leisure and hospitality added 128,000 jobs in January, up from an average monthly gain of 89,000 jobs in 2022.
Government employment also increased, partially reflecting the return of university workers after a strike. Government added 74,000 jobs as state government jobs rose by 35,000.
Construction added 25,000 jobs, compared with an average monthly gain of 22,000 in 2022.
Manufacturing added 19,000 jobs in January, compared with an average 33,000 per month in 2022. Motor vehicles and parts manufacturing lost 6,500 jobs in January.
Mining, quarrying, and oil and gas extraction added 2,600 jobs, with oil and gas up by 1,000 and coal mining down by 400.
Transportation and warehousing added 23,000 jobs in January, matching the average monthly gain for 2022. Truck transportation added 4,100 jobs and air transportation added 2,800 jobs in January. Rail added 500 jobs.
Average hourly earnings rose by 0.3pc on the month and were up by 4.4pc over 12 months, the lowest wage inflation since August 2021.