US Economy Creates 353,000 New Jobs to Kick Off 2024

Health care, retail, and government drive much of the employment gains.

A 'Join Our Team' sign is posted outside a coffee shop on Jan. 3, 2024, in Los Angeles. U.S. job openings fell to 8.79 million in November, the lowest in over two years, according to the U.S. Labor Department. Photo by Mario Tama/Getty Images

The U.S. economy created 353,000 new jobs in January, nearly doubling economists’ forecasts, highlighting a solid labor market to kick off the new year.

The unemployment rate was unchanged at 3.7 percent, better than the consensus estimate of 3.8 percent, according to the Bureau of Labor Statistics (BLS).

The employment gains were concentrated mainly in health care (70,000), retail (45,000), government (36,000), and social assistance (30,000).

Average hourly wages picked up steam last month, rising to a higher-than-expected 4.5 percent year-over-year and jumping by 0.6 percent monthly.

The labor force participation was flat at 62.5 percent. Average weekly hours dipped to 34.1 from 34.3.

BLS data revealed upward revisions to the November 2023 and December 2023 jobs data by 9,000 and 117,000, respectively. This means that the U.S. economy added 182,000 positions in November 2023 and 333,000 jobs in December 2023.

The number of people working two or more jobs fell from a record high to 8.272 million.

Full-time jobs dropped by 63,000, while part-time jobs climbed by 96,000.

The number of people who aren’t in the labor force but want a job was little changed at 5.8 million, and the number of individuals employed part-time for economic reasons was also little changed at 4.4 million.

Market Reaction

The financial markets moved higher as investors interpreted the results as a sign of economic resilience. The S&P 500 rose by 1.1 percent, reaching a record high. The Dow Jones Industrial Average climbed by 0.4 percent, or more than 100 points, while the tech-heavy Nasdaq Composite gained 1.7 percent.

U.S. Treasury yields soared on the news. The benchmark 10-year yield surged toward 4 percent. The two-year yield added 16 basis points to above 4.35 percent, while the 30-year bond topped 4.18 percent.

The U.S. Dollar Index, a gauge of the greenback against a basket of currencies, rocketed above 103.60.

The increase in the buck and Treasury yields were fueled by diminished odds of early rate cuts, according to Scott Anderson, chief U.S. economist at Bank of the West.

“The job gains, if not revised down in future releases, will definitely put a dampener on early rate-cut prospects,” Mr. Anderson said in a note. “The Fed was right to be cautious in signaling near-term rate cuts at this week’s FOMC meeting.”

The January jobs report is another indicator that recession fears may be overblown, according to Mark Hamrick, the senior economic analyst at Bankrate.

“So much for imminent recession fears. The U.S. economy has continued a surprisingly robust sustained recovery after the pandemic, working through the elevated number of job openings and with prices that remain elevated after inflation has come off full boil. This moderation, or normalization, still has some way to go,” Mr. Hamrick said in a statement.

According to Andrew Crapuchettes, CEO of RedBalloon, many businesses took advantage of the large corporations downsizing personnel and “snapped up those employees.”

“This is a story of supply and demand,” he said. “January saw the second highest layoff rate in history, which drove a large supply of available talent into a labor market where the demand for their skills was high.”

Bryce Doty, senior portfolio manager and vice president at Sit Investment Associates, said the latest employment data was a “relief.”

“[A] 353 thousand increase in jobs will continue to help resolve any remaining supply shortages. Given the still large number of job openings, it’s not fair to say those jobs were ‘created’ last month. More like a relief that 353,000 open positions were finally filled,” Mr. Doty said. “The blowout jobs likely represents both a strong economy and people feeling more and more like they need to give up their side gig and work in a normal job to make ends meet.”

Summary of Labor Data

Heading into the January jobs report, there was a flood of labor data for economists and market analysts to sift through.

The Job Openings and Labor Turnover Summary was compelling for many observers because it highlighted elevated worker demand.

In December 2023, the number of job openings rose by 101,000 to a three-month high of 9.026 million, topping the consensus estimate. Job quits tumbled by 132,000 to 3.392 million, the lowest reading since January 2021. The quits rate, which assesses voluntary employment leaves as a percentage of total employment, was little changed at 2.2 percent, the lowest level since September 2020.

However, labor experts warn that job openings have remained in this range for too long, signaling that these workers aren’t returning to the workforce.

Payroll processor ADP reported that private companies added 107,000 workers last month, falling short of economists’ expectations of 145,000. This was also a drop from the downwardly revised 158,000 in December 2023.

Wage growth continued to ease as job-stayers experienced a 5.2 percent pay bump, and job changers witnessed a 7.2 percent pay increase, according to its National Employment Report.

At the same time, U.S.-based employers terminated 82,307 workers in January, according to the monthly Challenger, Gray & Christmas report. This was the highest number of job cuts in 10 months, led by finance (23,238) and technology (15,806).

Broader economic developments and cost-cutting efforts fueled the significant number of layoffs, according to senior vice president Andrew Challenger.

“As we step into 2024, the landscape is shaped by stabilizing prices and the anticipation of falling interest rates. It is also an election year, and companies begin to plan for potential policy changes that may impact their industries,” Mr. Challenger said in a statement. “However, these layoffs are also driven by broader economic trends and a strategic shift towards increased automation and AI adoption in various sectors, though in most cases, companies point to cost-cutting as the main driver for layoffs.”

A reduction in job postings is widely expected in the coming months, particularly as economic growth slows and consumer trends change, according to Cassandra Happe, an analyst at WalletHub.

“Job sectors that offer in-person services are less likely to see a decline in job postings in the coming months compared to high-remote sectors,” Ms. Happe said in a note. ”As economic growth slows and consumer demands change, many employers are rethinking their staffing plans. Job postings in highly remote sectors peaked in early 2022, according to Indeed, and have steadily declined since then.”

Elsewhere in the labor arena, productivity levels slowed in the fourth quarter, rising by 3.2 percent, down from a revised 4.9 percent in the previous three months. Unit labor costs jumped by 0.5 percent, up from a downwardly adjusted negative 1.1 percent.

The widely watched employment cost index also eased to a lower-than-expected 0.9 percent in the October-to-December 2023 period, down from the 1.1 percent increase in the third quarter.

According to the Department of Labor, the number of first-time unemployment applications rose for the second consecutive week to 224,000, driven by California, New York, and Oregon. Continuing jobless claims edged up to a nine-week high of 1.898 million, while the four-week average, which strips the week-to-week volatility, jumped to 207,750.