The U.S. added far more jobs than expected last month, according to data released by the Labor Department, as the economy walks the tightrope of maintaining a strong labor market while simultaneously bringing down inflation to a palatable level.
Total employment swelled by 353,000 in January, blowing past consensus economist estimates of 185,000, according to Dow Jones data, checking in well below December’s 216,000 and January 2023’s 517,000.
Unemployment stayed flat at 3.7%, below forecasts of 3.8%.
Hourly age growth grew to 4.5% on an annual basis, stronger than last month’s 4.1% but lower than the roughly 6% average pay bump workers enjoyed in 2022, but is within the typical, pre-pandemic historical range and comfortably outpaces the 3.4% headline inflation in December.
The stronger-than-expected jobs report coincides with a spate of high-profile layoffs largely targeting office workers, including 1,900 cuts at Microsoft’s video game division and 1,000 cuts at eBay. The more than 80,000 layoffs conducted by American employers last month made January the second- worst month for layoffs since the height of the Great Recession in 2009, according to job placement firm Challenger, Gray & Christmas.
American workers enjoyed historically low unemployment and historically high wage growth for much of 2021 and 2022, but households largely did not get to enjoy the associated wealth effects. That’s because inflation far outpaced pay increases, with annual inflation peaking at an eye-popping 9% in mid-2022. The Federal Reserve accordingly moved to rein in inflation, raising interest rates to their highest level since 2001, cooling the labor market as collateral damage as employers grappled with higher borrowing costs. However, with inflation moderating considerably in recent months, investors expect the Fed to soon slash rates.
CORRECTION (2/2): This story has been updated to note that the unemployment rate remained flat from December to January.