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.
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.”
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.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.
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.
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.”
