The United States job market started 2023 with a remarkable performance, as nonfarm payrolls recorded their strongest growth since July 2022, according to a report from the Labor Department. On Friday, the report showed that nonfarm payrolls increased by 517,000 in January, far surpassing the Dow Jones estimate of 187,000 and the growth of 260,000 seen in December.
The unemployment rate in the US fell to a low of 3.4% in January, the lowest it has been since May 1969. Additionally, the labor force participation rate increased to 62.4%. However, the household survey, which is used to calculate the unemployment rate, showed a rise in the broader measure of unemployment, including discouraged workers and those working part-time for economic reasons, to 6.6%.
Despite this positive employment news, the markets reacted negatively, with the Dow Jones Industrial Average falling by approximately 100 points in early trading. The growth in job creation can be attributed to the expansion in multiple sectors, including leisure and hospitality with 128,000 jobs, professional and business services with 82,000 jobs, government with 74,000 jobs, and health care with 58,000 jobs. The retail and construction industries also saw growth with 30,000 and 25,000 jobs added respectively.
Wages also showed a significant increase in January, with average hourly earnings rising by 0.3% and 4.4% from the previous year. The unemployment rate for Blacks fell to 5.4%, and the rate for women was recorded at 3.1%.
Despite the Federal Reserve’s attempts to slow down the economy and curb inflation, which has reached its highest level since the early 1980s, the US job market continues to show remarkable resilience. The Fed has raised its benchmark interest rate eight times since March 2022. However, markets are betting that the central bank will begin cutting interest rates before the end of 2023.
Gross domestic product grew at a pace of 2.9% in the fourth quarter of 2022, and the Atlanta Fed’s GDPNow tracker predicts a 0.7% increase in the first quarter of 2023, though this is based on incomplete data. Despite this, most economists still predict a shallow recession in 2023, although the job market’s strength could lead to rethinking this forecast.
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