The employment picture started off 2023 on a stunningly strong note, with nonfarm payrolls posting their strongest gain since July 2022.
Nonfarm payrolls increased by 517,000 for January, above the Dow Jones estimate of 187,000. The unemployment rate fell to 3.4% vs. the estimate for 3.6%. That is the lowest jobless level since May 1969.
Markets slumped following the report, with futures tied to the Dow Jones Industrial Average down about 200 points.
Growth across a multitude of sectors helped propel the massive beat against the estimate.
Leisure and hospitality added 128,000 jobs to lead all sectors. Other significant gainers were professional and business services (82,000), government (74,000) and health care (58,000).
Wages also posted solid gains for the month. Average hourly earnings increased 0.3%, in line with the estimate, and 4.4% from a year ago, 0.1 percentage point higher than expectations.
The surge in job creation comes despite the Federal Reserve’s effort to slow the economy and bring down inflation from its highest level since the early 1980s. The Fed has raised its benchmark interest rate eight times since March 2022.
In its latest assessment of the jobs picture, the Fed on Wednesday dropped previous language saying gains have been “robust” and noted only that the “unemployment rate has remained low.”
However, Chairman Jerome Powell, in his post-meeting news conference, noted the labor market “remains extremely tight” and is still “out of balance.” As of December, there were about 11 million job openings, or just shy of two for every available worker.
Though Fed officials have expressed their intention to keep rates elevated for as long as it takes to bring down inflation, markets are betting the central bank starts cutting before the end of 2023.
This is breaking news. Please check back here for updates.
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