Jobs report shows blowout 517,000 gain in U.S. employment in January

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Number: The number of new jobs created in January rose by 517,000, the largest increase in six months, indicating continued strength in a strong US labor market even as the economy showed signs of slowing.

The increase in new jobs was much stronger than the 187,000 forecast by economists polled by The Wall Street Journal. This could put more pressure on the Federal Reserve to take tougher measures to combat inflation.

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One caveat: The government’s formula for adjusting for seasonal fluctuations in hiring sometimes overstates employment levels in January. It is not clear whether this was the case last month.

Yet employment grew even faster than previously reported in the waning months of 2022, indicating that the labor market is still strong.

A “We’re Hiring” sign is displayed in front of a store in Washington, DC. The US economy added 517,000 new jobs in January, the government said on Friday.

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What’s more, the unemployment rate has dropped from 3.5% to a 54-year low of 3.4%, government said on Friday, This is the lowest level since 1969.

In another sign of strong labor demand, the number of hours people worked increased by 0.3 hours to 34.7 hours, matching the highest level in a year.

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A 0.3% increase in hourly wages was the only seeming sign of moderation in the report.

As a result, hourly wage growth slowed again from 4.8% to 4.4% over the previous year, indicating some relaxation of wage pressures.

Still, the broad strength of the report is likely to worry the Federal Reserve and keep the pressure on the central bank to raise interest rates.

The Fed is concerned about the tight labor market that is pushing up wages and making it harder to moderate high inflation.

US Stocks DJIA,

Bond yields rose in premarket trades following the report.

Main details: Most major industries added workers last month.

Hotels and restaurants (128,000) led the way, but hiring was also strong among health care providers and white-collar professional occupations.

The only part of the economy to shed jobs was information services, a category that includes media and some high-tech businesses. Many companies in those sectors have announced layoffs in recent months.

The share of working-age people in the labor force – known as the participation rate – ticked up from 62.3% to 62.4%.

However, this is still well below pre-pandemic levels, and reflects the gap between labor demand and the supply of willing workers.

Hiring in the second half of 2022 was also stronger than previously reported following government amendments. The economy created an additional 304,000 jobs from July to December compared to earlier estimates.

big picture: The economy is slowing and the risk of a recession is rising as higher interest rates reduce growth. Many big companies like Amazon AMZN,
ibm ibm,
and Fedex FDX,
Layoffs have been announced and more job cuts are expected.

Yet the labor market has also proven to be quite resilient and many businesses are reluctant to lay off employees, given how difficult it was to hire them in the first place. If job losses remain low, America may even be able to avoid a recession.

The path of the economy will depend on how high the Fed raises interest rates in its fight to reduce inflation. Price pressures are easing, but inflation is still too high for the Fed to stomach.

looking ahead: “Businesses continue to try and retain as many workers as possible despite a slowdown in economic activity and an increasingly uncertain outlook,” said Thomas Simons, money markets economist at Jefferies LLC.

“A surprisingly strong jobs report raises serious doubts about the economy slipping into recession and whether the Fed will end its tightening cycle this spring,” said Sal Guatieri, senior economist at BMO Capital Markets.

Market Feedback: Dow Jones Industrial Average DJIA and the S&P 500 spx were set to open lower in Friday’s trading.

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