US Job Market Delivers Another Big Upside Surprise
- According to the Establishment Survey, the US added 353,000 jobs in January.
- Revised data were also released today. Job gains for 2023 were upwardly revised by +359,000, from 2,697,000 to 3,056,000.
- Unemployment held steady at 3.7% in January.
Once again, the job market surprised us all with its strength. It added 353,000 jobs in January, almost twice as many as the consensus forecast of 180,000.
In addition, data for 2023 was revised upward to show a gain of +359,000, although 2022 and 2021 data was revised downward by -265,000 and -22,000, respectively. Total nonfarm employment at the end of 2023 was revised upward by 115,000, in addition to the increase in January. This resulted in a much rosier picture than expected.
If we take a closer look at January's results, we see that the gains are broad-based. In January, 65.6% of the 250 sectors surveyed reported expanded payrolls, compared to 64.0% in December and only 52.4% in November. Most of the increase was in private services, which posted its biggest advance in a year (289,000). That included 45,200 net hires in retail trade and a solid gain of 112,000 jobs in private education and health services. One of the few soft spots was accommodation and food services, which lost 5,500 jobs, possibly due to the chilly weather that hit a number of regions in January. Interestingly, temporary help services recorded an uptick (+3,900) for the first time since March 2022.
As far as wages are concerned, the pressure is still on. The average hourly wage rose 0.6% month-on-month in January, the most in nearly 2 years. The year-over-year change climbed to 4.5%, back to where it was in September. That said, this increase may have been somewhat exaggerated by the decline in hours worked in some lower-wage industries. Although US labour productivity is high, the strength of the job market makes it hard to slow wage growth to a rate that's consistent with the 2% inflation target.
The US job market remains surprisingly robust. This will make it hard for the Fed to be confident that inflationary pressures have eased enough to cut rates anytime soon. If employment and wage growth stay resilient, it will take another few meetings before we can hope to see the Fed start loosening US monetary policy.
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