The employment outlook started 2023 on a surprisingly strong note, with nonfarm payrolls posting their biggest gain since July 2022.
Nonfarm payrolls increased by 517,000 in January, above the Dow Jones estimate of 187,000. The unemployment rate fell to 3.4% from the estimate of 3.6%.
Growth in a multitude of sectors helped fuel the huge beat against estimate.
Leisure and hospitality add 128,000 jobs to lead all sectors. Other significant gainers were professional and business services (82,000), government (74,000) and health care (58,000).
Wages also posted solid gains for the month. Median hourly wage increased 0.3%, in line with the estimate, and 4.4% over the prior year, 0.1 percentage points above expectations.
The increase in job creation comes despite efforts by the Federal Reserve to slow the economy and reduce inflation from its highest level since the early 1980s. The Fed has raised its benchmark interest rate eight times since March 2022.
In its latest assessment of the jobs outlook, the Fed on Wednesday removed previous language saying earnings have been «robust» and noted only that the «unemployment rate has remained low.»
However, Chairman Jerome Powell, in his post-meeting press conference, noted that the labor market «remains extremely tight» and is still «unbalanced.»
The increase in job creation comes despite efforts by the Federal Reserve to slow the economy and reduce inflation from its highest level since the early 1980s. The Fed has raised its benchmark interest rate eight times since March 2022.
In its latest assessment of the jobs outlook, the Fed on Wednesday removed previous language saying earnings have been «robust» and noted only that the «unemployment rate has remained low.»
However, Chairman Jerome Powell, in his post-meeting press conference, noted that the labor market «remains extremely tight» and is still «unbalanced.» As of December, there were about 11 million job openings, or just two for every available worker.
«Today’s report is an echo of the surprisingly resilient 2022 job market, beating recession fears,» said Daniel Zhao, chief economist at jobs review site Glassdoor. «The Federal Reserve has a New Year’s resolution to cool the job market, and so far, the job market is going backwards.»
Although Fed officials have expressed their intention to keep rates high for as long as it takes to reduce inflation, markets are betting the central bank will start cutting before the end of 2023. Traders raised their bets that the Fed would approve quarter percentage point interest. rate hike at its March meeting, with the probability rising to 94.5%, according to CME Group data.