The U.S. economy started the year off with a feat of strength, adding 517,000 jobs in the first month of 2023, three times more than the 185,000 estimated by analysts.
The U.S. economy added these jobs while the unemployment rate and the number of unemployed persons changed little, the U.S. Bureau of Labor Statistics (BLS) reported Friday.
January’s widespread job growth was nearly double that of December and surpassed the average monthly gain of 401,000 in 2022. Gains during the month were led by leisure and hospitality (+128k), professional business services (+82k), and health care (+58k), BLS said in its report.
The unemployment rate showed little net movement since early 2022 and came in at 3.4%, the lowest level since 1969. Employment also increased in the governmental sector (+74K), which partially reflected the return of workers from a university strike in California.
Friday’s strong jobs report follows Wednesday’s less hawkish FOMC statement by Federal Reserve officials, which approved the first 0.25 percentage point increase of 2023.
“This is a labor market on heat. Nobody would have expected a number as monstrous as this!” said Seema Shah, principal asset management chief global strategist in a note reported by Yahoo Finance.
“Is Fed Chair Jerome Powell now wondering why he didn’t push back on the loosening in financial conditions?”
In order to tighten financial conditions and bring inflation down to its 2% target goal, the Federal Reserve began increasing its pace of rate hikes in March 2022. Since then, Fed officials have issued eight consecutive rate increases and lifted the Fed’s funds rate to a range of 4.5% and 4.75%, according to data by the New York Fed.
Other notable job gains in January were seen in retail trade (+30K), construction (+25k), transportation and warehousing (+23K), and manufacturing (+19K), the report shows.
Despite the strong number of hires in January, many companies are still in the midst of a hiring freeze, while others, particularly in the tech industry, continue to issue widespread layoffs.
Average hourly earnings increased 0.3% in January, coming in line with month-over-month expectations. On an annual basis, average hourly earnings rose 4.4%, slightly higher than the 4.3% consensus. The average workweek also rose by 0.3 an hour to 34.7 hours in January, the highest since March 2022.
“This is just incredibly, surprisingly strong,” said Kathy Bostjancic, chief economist at Nationwide, as reported by The Wall Street Journal. “Not only are you hiring more workers, but the workers you have overall are working more hours. It doesn’t really get stronger than that.”