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The US labor market witnessed an unexpected jolt last month, as employers added 517,000 jobs and the unemployment rate fell to its lowest level in more than half a century.
Even the rain, snow and ice that covered most of the country last month was not able to freeze the job market.
Job gains for November and December were also revised up by 71,000 jobs, according to A Friday’s report from the Department of Labor. The jobs count for January is based on surveys taken three weeks ago, when many states were in the grip of severe winter weather.
The data shows that the job market remains tight, even as the overall economy shows signs of slowing. The unemployment rate fell to 3.4% – a level not seen since May 1969.
Sectors that are employed
Over the past three months, employers have added an average of 356,000 jobs each month. While that’s a slowdown from last year, it’s much faster job growth than in 2019, before the pandemic, when employers were adding an average of 164,000 jobs per month.
Despite some high-profile job cuts, particularly among high-tech companies, layoffs are still rare.
“The job market remains very tight, the unemployment rate is at a 50-year low, job vacancies are very high, and wage growth is high,” Federal Reserve Chairman Jerome Powell said this week.
Restaurants and bars added 99,000 jobs last month, and the increase in new jobs indicates that demand for workers in the industry remains strong. Construction companies added 25,000 jobs in January, while factories added 19,000 jobs.
Manufacturing orders have slowed in recent months, but factories are reluctant to shrink their workforces, hoping business will pick up later in the year.
“I think what happened is companies decided, ‘Let’s not do without them.'” It is going to be very difficult to get them back and then we will miss the upside in the second half [of the year]said Tim Fury, who leads Monthly survey of factory managers Institute for Supply Management.
Wages are still rising, but not by as much
The tight labor market means wages will continue to rise, though not as quickly as they did earlier in the pandemic. The central bank watches wages closely because it worries that increasing compensation could keep upward pressure on prices — especially in labour-intensive service industries — making inflation harder to control.
“My point is, you’re not going to get a sustainable return to inflation of 2% without a better balance in the labor market,” Powell said.
Friday’s report shows median earnings in January were 4.4% higher than a year ago — compared with the 4.6% annual gain in December.
“The increases are moderate, but they’re moderate from a higher level,” said Nella Richardson, chief economist at payroll processing firm ADP.
Job growth has been strong for two years
The report also shows that job gains in 2024 and early 2024 were stronger than initially reported.
Once a year, the Department of Labor reviews the job census using more complete information from employers’ tax records. The annual update shows that US employers added 568,000 more jobs than initially calculated in the 12 months ending in March.
In the 24 months since President Biden took office, employers have added a record 12.1 million jobs. The president is likely to tout that number in his State of the Union address next week.