US unemployment hits 53-year low as employers add 517,000 jobs in January

U.S. hiring was shockingly high in January, with employers adding 517,000 jobs in a blockbuster that could put pressure on the Federal Reserve to keep raising interest rates.

The country’s employment rate fell to just 3.4% – the lowest level since May 1969 – in a sign that the labor market remains extremely tight despite signs of a slowdown in the US economy and a recent wave of layoffs in the technology sector.

Labor force participation has jumped to 62.4%, but is still well below pre-pandemic levels.

“Job growth in January was broadly driven by gains in leisure and hospitality, professional and business services, and health care,” the Bureau of Labor Statistics said in a statement.

“Employment has also increased in government, partly reflecting the return of workers after the strike,” the feds added.

The staggering figure comes despite fears that the Fed’s recent series of sharp rate hikes will lead to serious job losses. At the same time, wage growth slowed in January, potentially easing Fed officials’ fears that a strong labor market will fuel inflation.


Bureau of Labor Statistics

The average hourly wage rose 4.4% in January compared to the same month a year earlier. The number fell after rising 4.8% year-on-year in December. On a monthly basis, wages increased 0.3% from December to January, slightly slower than the 0.4% increase from November to December.

Ahead of the publication, economists had expected jobs to rise by just 187,000 in January. This increase follows a 260,000 job increase in December. The unemployment rate was expected to hover around 3.6%.

President Biden said the strong result is proof that his “economic plan is working.”


Hiring sign
The Fed is keeping a close eye on the labor market as it considers further rate hikes.
AP

US stocks initially tumbled after the January jobs report, with the Dow Jones Industrial Average, Nasdaq Tech Index and the broad-based S&P 500 trading in negative territory. By late Friday morning, the Dow Jones index won back previous losses and became positive.

“An undeniably strong report is what markets are hoping to come out of a recession, but not what you want to see when expectations of an end to the Fed’s rate hike campaign are suddenly challenged by a much stronger labor market,” said Quincy Crosby, chief global strategist at LPL Financial.

A strong jobs report could heighten anxiety among recession-fearing investors, who have urged the Fed to pause its anti-inflation campaign. Inflation fluctuated at 6.5% in December, up from a decade-long peak in the middle of last year, but still well above the Fed’s 2% target.

“Now we think the Fed is likely to hike rates in March,” Pantheon Macroeconomics chief economist Ian Shepherdson said in a note to clients on Friday.

Earlier this week, the Fed raised its benchmark interest rate by a quarter of a percentage point, the eighth consecutive increase but the lowest in nearly a year. The Federal Open Market Committee, which meets again next month, said it expects “continued increases” in interest rates.


President Biden
President Biden said the strong result is proof that his “economic plan is working.”
REUTERS

Fed Chairman Jerome Powell noted that a “disinflationary process” had begun, but stressed that officials would need more signs of sustained price declines before they consider a policy pause.

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texasstandard.news contributed to this report.

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