The U.S. economy added 353,000 jobs in January, a shockingly strong pickup, even as higher interest rates continue to ripple through the economy.
The unemployment rate held at 3.7 percent, and has now been below 4 percent for two years, the longest stretch since the 1960s.
Job gains were roughly double economists’ predictions of 177,000, underscoring that the labor market is propelling the economy forward, despite some high-profile layoffs at technology and media companies in January.
Robust consumer spending has allowed employers to hire at a rate that’s fast enough to keep up with population growth, including a surge in immigrant arrivals, and accelerating wage growth continues to outpace inflation, boosting workers’ spending power.
“This was a blockbuster jobs report,” said Jason Furman, an economist at Harvard University and former adviser to the Obama White House. “The continued strength of the labor market is truly stunning. It’s yet more evidence that we’re not close to having been in a recession.”
The data also indicated that the labor market in 2023 was even stronger than previously thought, with upward revisions of 126,000 jobs gained in November and December combined.
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Consumer sentiment in January reached a high not seen since July 2021, according to a closely watched index by University of Michigan.
“America’s economy is the strongest in the world,” Biden said in a statement. “Today, we saw more proof, with another month of strong wage gains and employment gains of over 350,000 in January.”
Payrolls swelled across a variety of industries in January after months of job growth concentrated in a few industries. Professional and business services, which covers a range of white-collar jobs that had been hit hard by interest rate hikes, added 74,000 jobs, soaring past the sluggish average monthly gain of 14,000 jobs in 2023. Fueled by a rapidly aging baby boomer population, health care added 70,000 jobs, with the strongest gains in ambulatory health care, hospitals and nursing homes.
“Corporate America hit the accelerator to meet the increase in demand,” said Joe Brusuelas, chief economist at the accounting firm RSM. “The economy accelerated in the fourth quarter of the year. We’re seeing a rational response by firms to meet that demand.”
Government added 36,000 new roles, mostly in federal and local government, as wage gains that tend to lag behind the private sector have risen enough to attract new workers.
The retail industry created 45,000 jobs, mostly at general merchandise stores, and manufacturing added 23,000 jobs, though both industries have shown little overall change since early 2023.
Average hourly wage growth accelerated sharply in January, rising by 0.6 percent, to $34.55 an hour, in part because higher-paying industries boosted their payrolls after months of tepid jobs growth. Over the past 12 months, hourly wages have risen by 4.5 percent, raising workers’ standard of living, especially the lowest earners. Federal Reserve policymakers are closely watching wages, hoping to see more moderated wage growth as a sign that inflation is under control.
The strong labor market report will get a close review at the Fed, where policymakers are trying to pinpoint the right time to lower interest rates for the first time since 2020. For the past two years, officials have been focused on raising rates — and keeping them higher — to tame inflation and slow the economy down. And so far, they’ve managed to do so without causing any major slowdown in hiring, a feat considered near impossible last year.
Fed officials have consistently said they need months of data to sharpen their understandings of the economy; one unexpectedly strong jobs report, or one disappointing inflation report, isn’t enough to shake their plans off course. And that’s partly why Fed Chair Jerome H. Powell this week said the Fed needs a bit more time before cutting rates.
Government policy has played an important role in supporting the U.S. economy, with the Biden administration’s efforts to fund new infrastructure and clean energy projects that have created jobs in construction, telecommunications and other fields.
Acting Labor Secretary Julie Su told The Washington Post that “none of this jobs growth was inevitable,” attributing the flourishing labor market to Biden administration policies that have “put more money in workers’ pockets,” including the American Rescue Plan, the infrastructure bill and the Inflation Reduction Act.
The S&P 500 and Nasdaq ticked up after the release of the jobs report, with investors recalibrating expectations of when the Fed could begin lowering interest rates.
The unemployment rate has barely budged in months, even as job creation soared in December and January. Erica Groshen, former head of the U.S. Bureau of Labor Statistics, said that could be because new workers entering the labor market have “got jobs immediately and weren’t hanging out unemployed.” Women and immigrants have been joining the labor market in unexpectedly strong numbers.
Experts also caution that January’s strong jobs numbers could overstate the true status of the labor market, since seasonal adjustments at the start of the year can distort the data.
And some industries are struggling. Last week, the number of Americans applying for unemployment benefits rose to an 11-week high. Amazon, Microsoft, Google and many other tech companies said they will cut tens of thousands of jobs this year, and retailers such as Macy’s and REI have announced workforce reductions. UPS also announced about 12,000 layoffs this week, as the transportation and warehousing industry has reversed some of the massive expansion experienced during its pandemic e-commerce boom. Layoffs more than doubled between December and January, from 34,817 to 82,307, according to employment firm Challenger, Gray & Christmas.
But economists aren’t concerned about layoffs concentrated in a few industries triggering a broader meltdown. Layoffs are still trending below their pre-pandemic levels, according to data released by the Labor Department on Tuesday.
“In this low-unemployment environment, most of the laid-off workers will likely manage to find new jobs fairly quickly,” said Julia Pollak, chief economist at ZipRecruiter. “While some individual workers may struggle to find comparable work, the layoffs are unlikely to have an effect in the aggregate.”
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Last year the public sector, which includes education, caught up with its pre-pandemic employment levels, after struggling for years with an understaffing crisis. More robust pay and benefits packages have made those jobs more attractive to workers.
Lindsey Rogers, 27, and her husband, Jared, public school teachers in Baker City, Ore., saw their household income double at the start of this school year, rising by around $48,000, because of mandated salary increases in their new union contract. Their school district in rural Eastern Oregon in previous years struggled to fill open positions, but started this school year without a single vacancy because teacher pay jumped significantly, said Erin Lair, superintendent of the Baker School District.
For the Rogers family, the pay increase means they can afford the $750-a-month child-care costs for their new baby.
“We sat down at a union meeting on Zoom, and they pulled up our new pay scale and it was life-changing,” Rogers said. “I was in shock. We were both in tears. We were going to be able to provide a great life for our kid. We were actually going to be paid like professionals.”
Rachel Siegel contributed to this report.
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