The U.S. economy added more than half a million jobs in January, an astonishing number that pushed the jobless rate down to its lowest level in half a century.
The Bureau of Labor Statistics said Friday that the job gains were widespread, with leisure and hospitality, professional and business services, health care, retail, construction and government all adding workers. The oil and gas sector, IT and financial services were all basically flat, but no sectors lost jobs.
The job gain was more than twice the 197,000 that economists were expecting. It was also enough to push the jobless rate down to 3.4 per cent. That’s the lowest level on record since 1969.
January’s numbers are even better than the torrid pace seen in 2022, where on average the U.S. economy added 375,000 new jobs every month.
January’s total means that there are now only 5.6 million people in America who classify as officially unemployed, which means they are of working age, are seeking a job but can’t get one.
Inflation concerns remain
The average hourly wage rose by 10 cents during the month to $33.03. That’s an increase of 4.4 per cent in a year, but still well below the pace of inflation.
The booming job market is good news for workers, but paradoxically it suggests that inflation is likely to remain high. The U.S. central bank, the Federal Reserve, has hiked interest rates aggressively in recent months trying to tame inflation, but so far, all it has managed to do is bring the annual rate down from eight per cent to six per cent.
The strong jobs number suggests the Fed will think it needs to do even more. Prior to the numbers coming out, investors in financial instruments known as swaps thought there was about an 80 per cent chance that the Fed would hike its rate again at its next meeting.
After the data came out, those odds jumped to more than 90 per cent.
Economist Royce Mendes with Desjardins said the numbers suggest January was “an absolutely monster month for hiring.”
“We are more confident in our call that the Fed will continue raising rates at its next two meetings,” he said.