April 14, 2024
America isn't just surviving the recession – it's adding hundreds of thousands of new jobs


WASHINGTON (AP) — The nation’s employers ramped up hiring as early as 2024, adding 353,000 jobs in January, the latest sign of the economy’s continued ability to weather the highest interest rates in two decades.

Friday’s government report showed that job growth last month – nearly double what economists had predicted – was up from an increase of 333,000 in December, a figure that was itself sharply revised upward. The unemployment rate remained at 3.7%, slightly above a half-century low.

Wages also rose unexpectedly rapidly in January. Average hourly wages rose 0.6% from December, the fastest monthly gain in nearly two years, and rose 4.5% from January 2023. Strong hiring and wage growth could complicate or delay the Federal Reserve’s intention to begin cutting interest rates later this year.

The latest gains demonstrate employers’ willingness to continue hiring to meet steady consumer spending. It comes as an intense presidential campaign focuses on President Joe Biden’s economic leadership ideas. Public surveys show widespread dissatisfaction because even though inflation has slowed sharply, most prices remain well above pre-pandemic levels. However, some recent surveys suggest that public acceptance is gradually improving.

This week, the Fed focused on the stability of the economy, with Chairman Jerome Powell saying, “The economy is performing well, the labor market remains strong.” The central bank made it clear that although it is close to the long-awaited shift towards cutting interest rates, it is in no hurry to do so.

Details from Friday’s jobs report pointed to broad hiring gains across the economy. Professional and business services, a category that includes managers and technical staff, added 74,000 jobs. Healthcare companies added 70,000, retailers 45,000, governments at all levels 36,000 and manufacturers 23,000.

The unemployment rate has now fallen below 4% for two consecutive years, the longest such period since the 1960s.

“Overall, the labor market remains strong and defying expectations of a slowdown,” said Rubeela Farooqui, chief U.S. economist at High Frequency Economics. “For Fed officials, these data reinforce patience on rate cuts.” Support from. “If job and wage growth remain strong in the coming months, policymakers will be in no rush to lower rates.”

Julia Pollack, chief economist at job marketplace ZipRecruiter, said not everything was in line with gangbuster job growth in the January report. For example, he reported that Americans worked an average of 34.1 hours per week last month, the lowest figure since 2010 excluding the COVID-19 recession.

“When consumer demand decreases, companies often cut employee hours before cutting payroll,” Pollack said. “Today’s reading could be a warning sign that demand for workers is softening and job cuts are likely.”

That said, she suggested the decline in work hours may reflect January’s winter storms that kept some people out of work.

To fight inflation, the Fed raised its benchmark rate 11 times from March 2022. Higher borrowing costs were widely expected to boost unemployment and cause a recession. Yet the economy has managed to deliver enough employment growth to avoid recession without increasing inflationary pressures. Inflation remained subdued throughout 2023, making it likely that the Fed will achieve a “soft landing” – taming inflation without derailing the economy.

The strong job gain in January makes it certain that the Fed will take a cautious approach to cutting its key interest rate, which affects many consumer and business loans. A March rate cut now certainly does not look possible.

At a press conference this week, Powell said solid hiring and economic growth do not necessarily mean the Fed will cut rates. And some economists say they still expect the first rate cut to happen in May.

“When we see strong growth, we don’t see it as a problem,” Powell said. “We want to see strong growth, we want to see a strong labor market.”

A series of high-profile layoff announcements from the likes of UPS, Google and Amazon have raised some concerns about whether they could herald a wave of job cuts. Yet compared to the country’s vast labor force, recent layoffs have not been significant enough to make a dent in the overall job market. Historically speaking, layoffs are still relatively low, hiring is still solid and the unemployment rate is still consistent with a healthy economy.

Overall, consumers have proven more resilient than expected in the face of the Fed’s rate hikes. Having wiped out savings during the pandemic, most people were ready to spend it once the economy reopened. And a wave of early retirements, some of them related to COVID-19, limited the number of people available for work and contributed to a tight labor market.

A series of recent surveys have revealed a gradual improvement in public confidence. The University of Michigan’s measure of consumer sentiment jumped over the past two months by the most since 1991. A survey by the Federal Reserve Bank of New York found that Americans’ inflation expectations have fallen to their lowest point in nearly three years. And a new poll from The Associated Press-NORC Center for Public Affairs Research found that 35% of American adults say the national economy is good, up from 30% who said so at the end of last year.

The rate at which Americans are leaving their jobs, considered a reliable predictor of wage trends, has slowed to pre-pandemic levels. This shows that workers’ confidence in finding better jobs elsewhere has diminished to some extent. As a result, employers may be less likely to feel pressure to raise wages to retain them and raise prices to offset their higher labor costs. That cycle can perpetuate inflation.

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AP Economics writer Christopher Ragaber contributed to this report.

Paul Wiseman, The Associated Press

Source: ca.finance.yahoo.com

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