by The United States produced an unexpectedly large number of jobs last month, a boon for American workers that shows the labor market remains remarkably strong after three years of expansion.
Employers added 353,000 jobs in January on a seasonally adjusted basis, the Labor Department reported Friday, and the unemployment rate remained at 3.7 percent.
The report also further highlighted job growth for 2023, including revisions that added more than 100,000 to the figure previously tallied for December. In total, employers added 3.1 million jobs last year, more than the 2.7 million initially reported.
After the loss of 14 percent of the country’s jobs at the start of the Covid-19 pandemic, the resilience of the labor market despite aggressive interest rate increases has caught economists off guard.
“I think everyone is surprised by the strength,” said Sara Rutledge, an independent economic consultant. “It’s almost like a ‘pinch me’ scenario.”
Ms. Rutledge helped tabulate the latest report from the National Association for Business Economics. member surveywhich found growing optimism that the country would avoid a recession, coinciding with a change in consumer sentiment measures as inflation has decreased.
January’s haul of added jobs, nearly double what forecasters expected, reflects equally surprising strength in gross domestic product measures for the fourth quarter of 2023. It is also likely to reinforce the Fed’s patient approach to interest rates, given the risk that they will increase. wages could push prices up more quickly.
Jerome H. Powell, Chairman of the Federal Reserve, signaled this week that rate cuts would not begin until at least May, citing a desire to see more evidence that inflation is returning to its target.
“The fact that it’s been below 4 percent for two years in a row is just a very clear and reliable sign that this is not just a tight labor market, but a reliably and persistently tight labor market,” Jared said. Bernstein, president of the White Committee. House Council of Economic Advisors.
January’s gains were also broader than in other recent reports: Professional and business services accelerated to 74,000 jobs, while healthcare added 70,000. The only major sector that cut workers was mining and logging.
Average hourly earnings also grew rapidly, up 0.6 percent from December.
Still, analysts cautioned against overinterpreting the month’s overall gain, given the recent volatility in the survey’s initial estimates. Last January, for example, was much stronger than the average for the entire year. And the latest report also contains some oddities.
The survey window was interrupted by bitter cold and snow storms, which likely shortened the work week and increased hourly wages. Additionally, the addition of so many relatively well-paid white-collar workers may have raised the average. Hotels and restaurants, where wages are lower, eliminated a few thousand jobs.
Agron Nicaj, a U.S. economist at banking and financial services firm MUFG, noted that job postings had increased in professional and business services in recent months. That may mean the January surge will be short-lived, especially given the latest report from outplacement firm Challenger, Gray & Christmas that found Layoff announcements increased last month. after a quiet quarter.
“I wouldn’t expect a reacceleration because of the relationship with the industries that grew this month and the openings,” Nicaj said. “I think this month reflects a turnover of jobs that they couldn’t fill.”
And yet, it’s clear that the new year dawned with what has been an exceptionally good economy for many workers. Wages have been growing faster than their historical rates, and a strong increase in productivity over the past three quarters has helped prevent those higher wages from driving higher prices. The number of job openings still exceeds the number of people looking for jobs, even as new immigrants and women have entered or reentered the workforce in unexpected numbers.
That trend may continue if higher wages continue to drive people away. The number of people not in the labor force who want a job has increased. increased in recent monthsto 5.8 million, suggesting they could re-engage if wages exceeded the cost of child care or a long commute.
Over the past year, most gains have been driven by sectors that were slower to recover from the pandemic (including hospitality and local government) or that saw a huge boost due to structural factors, such as aging demographics and demand. repressed housing. Construction companies have continued to hire even in the face of high interest rates, because homeowners with low-rate mortgages generally stay put, leaving new homes the only option for potential buyers.
Other categories that saw tremendous growth during 2021 and 2022, including transportation, warehousing and information technology, have returned to their pre-pandemic trends. Another handful of sectors, such as retail, have remained largely stable.
One of those who jumped from a shrinking sector to a more stable one is Galvin Moore, 33, who worked in information technology for a freight broker until last fall, when he noticed the trucking sector contracting. around it.
“It’s not just about job security, but also the fear that one’s career growth will be limited by the industry,” said Moore, who is married with three children in a Houston suburb. He left to take a position at an oil and gas services company that is moving into technologies such as geothermal energy and carbon capture. “They’re also in growth mode,” Moore added, “it’s just a different phase of the cycle.”
The new job also came with a 40 percent pay increase, allowing him to start paying off his debts and think about buying a new home. “It’s like night and day,” Moore said.
Despite high-profile layoff announcements at companies including UPS, Google and Microsoft, most employers have been reluctant to let go of their workers, worried about staff shortages if business picks up again. Although the share of workers leaving their jobs has returned to normal levels after an increase in 2022, Americans seem comfortable enough with their financial future to continue spending money.
That has led to waste at services like travel agencies, whose revenues fell to almost zero during the worst of the pandemic. While there are still a few thousand employees below 2019 levels, the American Society of Travel Advisors says data from the Bureau of Labor Statistics does not reflect an increase in workers who have joined the industry as independent contractors, often working part-time to supplement other jobs.
Kareem George, who runs a 10-person agency near Detroit that designs custom vacations, said his bookings were 20 percent above 2019 levels, and clients were increasingly asking for luxury experiences like high-end dining. level and private tours.
“I think there’s more confidence that they can plan longer term,” said George, who hopes to hire two more people over the next year. “So they don’t think so much about ‘I deserve it, I need to do it now,’ but also ‘I can also think about next year and the year after that.’”
In the coming months, economists expected the labor market to become more like it was before the pandemic, without the gigantic job growth that followed pandemic lockdowns. The latest figures may call that assessment into question.
Even the manufacturing sector, which has been in a mild recession for about a year, added 23,000 jobs. This reflects optimism in recent Purchasing Managers Index for Manufacturing Industry, which jumped unexpectedly last month. Timothy Fiore, chairman of the Institute of Supply Management committee overseeing the survey, said it seemed like the beginning of a turnaround, albeit a slow one.
“Now we’re starting to gain altitude,” Fiore said. “It is not a gain for a fighter pilot; It is a cargo plane profit.”
Jim Tankersley contributed reports.
