The U.S. labor market continues to report strong job numbers despite a broader economic slowdown, tightening financial conditions, and mass layoffs in the tech sector.
U.S. employers added 517,000 jobs in the first month of 2023, nearly triple what economists had estimated, according to the latest jobs report by the U.S. Bureau of Labor Statistics (BLS).
Over a three-month period, the U.S. has added a total of 1.1 million jobs. At the same time, the unemployment rate fell to 3.4%, the lowest level since 1969.
The stronger-than-expected jobs increase in January surprised several analysts and policymakers, who forecasted slower job growth due to the pullback in consumer spending, depleted savings accounts, record-high credit card debt, and the stream of layoffs that hit the tech industry last year and are anticipated to continue throughout 2023.
“This is a labor market on heat. Nobody would have expected a number as monstrous as this!” Seema Shah, chief global strategist for Principal Asset Management, said in a note, according to Yahoo Finance.
Goldman Sachs economists had to re-evaluate their 12-month forecast that the U.S. would fall into a recession from 35% to 25%, according to reporting from The Wall Street Journal.
Even Federal Reserve Chairman Jerome Powell seemed puzzled by the stronger-than-expected jobs report, commenting during a discussion at the Economic Club of Washington, D.C., that the jobs market was “certainly strong, stronger than anyone I know expected.”
Chairman Powell went on say, “It kind of shows you why we think [reducing inflation] will be a process that takes a significant period of time.”
As soaring interest rates cause tech firms to slam the red button and freeze hiring or otherwise lay off employees, other sectors continue to drive the boom in job growth.
The latest jobs report notes that “[j]ob growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care.”
“Is Fed Chair Jerome Powell now wondering why he didn’t push back on the loosening in financial conditions?” Shah added in her note, as reported by Yahoo News.
In order to tighten financial conditions and bring inflation down to its 2% target goal, the Federal Reserve issued eight consecutive rate increases and lifted the Fed’s benchmark rate to a range of 4.5% and 4.75%.
“The reality is we’re going to react to the data,” Chairman Powell said during the discussion.
“So, if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more than is priced in.”
Fed officials are currently projecting the need for two additional quarter percentage point increases, which they then plan to maintain at 5.1% until they have seen clear and convincing evidence that inflation is receding back to a tolerable level.
It is still early on in the year, and a lot can happen, including an unexpected wave of layoffs.
ResumeBuilder.com commissioned a survey in December asking if U.S. companies anticipate making considerable layoffs in 2023. Of the 1,000 business leaders surveyed, one-third estimated they would lay off 30% or more of their workforce in 2023.
“Our survey found that the tech and software sectors were overweight in terms of anticipated layoffs,” Stacie Haller, chief career advisor at ResumeBuilder.com, told The Dallas Express in December.
“Now, with increased uncertainty heading into 2023, many of these organizations are having to right-size following the huge hiring spree that took place pre-COVID. However, the preponderance for organizations is to implement a hiring freeze rather than lay off employees,” she said.