April 19, 2024
US economy added 353,000 jobs in January, better than expected

Job growth posted a surprisingly strong pick-up in January, demonstrating again that the U.S. labor market is solid and ready to support macroeconomic growth.

The Labor Department’s Bureau of Labor Statistics reported Friday that nonfarm payrolls increased by 353,000 for the month, significantly better than the Dow Jones estimate of 185,000. The unemployment rate stood at 3.7%, compared to estimates of 3.8%.

Wage growth also showed strength, as average hourly earnings rose 0.6%, double the monthly estimate. On a year-over-year basis, wages rose 4.5%, well above the 4.1% forecast. The pay increase came amid a decline in average hours worked, which dropped to 34.1, or 0.2 hours less for the month.

There was broad-based job growth this month, led by professional and business services with 74,000. Other significant contributors include health care (70,000), retail trade (45,000), government (36,000), social assistance (30,000) and manufacturing (23,000).

“This confirms that the job market is entering 2024 on solid footing,” said Daniel Zhao, chief economist at Glassdoor. “The fact that job growth was so broad across all industries is a healthy sign. In today’s report, we were concerned about how jobs were really concentrated in just three sectors – health care, education and government. “While it’s great to see those sectors seeing job growth, there’s no guarantee that it will be enough to support the health labor market.”

The report also indicated that job gains in December were much better than originally reported. There was a gain of 333,000 for the month, which was 117,000 more than the initial estimate. It was also revised down to 182,000 in November, or 9,000 more than the previous estimate.

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While the report demonstrated the resilience of the US economy, it may also raise questions about how quickly the Federal Reserve will be able to lower interest rates.

“Make no mistake, this was a shocking jobs report and will reaffirm the Fed’s recent stance,” said George Matteo, chief investment officer at Key Private Bank, which effectively ruled out an interest rate cut in March. ” “In addition, stronger job gains coupled with faster-than-expected wage growth could suggest an additional delay in rate cuts to 2024 and cause some market participants to recalibrate their thinking.”

The futures market changed after the report, with traders now having a better than 80% chance that the Fed will not cut interest rates at its March meeting, according to CME Group.

There was a mixed trend in the shares after the report. The Dow Jones Industrial Average fell at the open but the S&P 500 and Nasdaq were both positive. Fiscal yield increased.

Economists and policymakers are closely watching employment data for the direction of the larger economy in the January payrolls calculation. Some recent high-profile layoffs have raised questions about the sustainability of a powerful trend in hiring.

A more comprehensive measure of unemployment, which includes discouraged workers and people who hold part-time jobs for economic reasons, rose to 7.2%. The household survey, which measures the number of people actually holding jobs, differed significantly from the establishment survey, which showed a decline of 31,000 in the month. The labor force participation rate remained unchanged at 62.5%.

Broad layoff numbers, such as the Labor Department’s weekly report on initial jobless claims, show that companies are hesitant to part with workers in such a tight labor market. Gross domestic product growth has also been contrary to expectations.

The fourth quarter saw gross domestic product grow at an annual pace of 3.3%, ending a year in which the economy defied widespread predictions of a recession. The growth in 2023 also came as the Fed raised interest rates in an attempt to curb inflation.

The Atlanta Fed’s GDPNow tracker is pointing to a 4.2% rise in the first quarter of 2024, though with limited data on where things are headed in the first three months of the year.

Economic, employment and inflation dynamics create a complex picture as the Fed looks to ease monetary policy. Earlier this week, the Fed again held benchmark short-term borrowing costs steady and signaled that rate cuts could be on the way, but not until inflation shows further signs of moderation.

Chairman Jerome Powell indicated at the press conference after his meeting that the central bank does not have a “growth mandate” and said that central bankers are concerned about the impact that higher inflation will have on consumers, particularly at the lower end of the income scale. It is having an impact. ,

Apart from the wage numbers, recent data suggests that inflation is moving in the right direction.

Core inflation, measured by personal consumption expenditure prices, was only 2.9% in December on a year-on-year basis, while both the six- and three-month estimates suggest the Fed is at or near its 2% target.

Still, the Atlanta Fed’s measure of “sticky” inflation, which focuses on items such as housing, medical care services and insurance costs, was 4.6% on a 12-month basis in December.

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Source: www.cnbc.com

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