Hundreds of Thousands of Workers Hired in January, Smashing Expectations

Employers added 353,000 jobs in January, smashing expectations, in another signal that the U.S. economy continues to be robust despite high interest rates, data from the Bureau of Labor Statistics (BLS) showed on Friday.

In additional evidence of the strength of the labor market, hiring in November and December was revised up. In December, 117,000 more jobs were added than the previously reported 216,000 to bring recruitment for the month to more than 330,000. November was also adjusted up by 9,000 to 182,000.

The unemployment rate was unchanged at 3.7 percent. Meanwhile, wages also increased more than expected as hourly earnings went up 0.6 percent, double the forecast. For the year, wages went up 4.5 percent.

Hiring took place across most industries, government data showed, although employment fell in the mining and oil and gas sectors.

"Job gains occurred in professional and business services, health care, retail trade, and social assistance," the BLS said.

Economists had expected 185,000 new jobs in January.

"Today's jobs report was truly striking, beating expectations for January and revising 2023 job gains upwards," Julia Pollak, the chief economist at ZipRecruiter, said in a note shared with Newsweek. "Job growth accelerated and broadened in January. Job gains were broadly distributed across the economy, with even manufacturing and retail—two sectors where job growth was particularly weak in 2023—posting strong gains."

The latest jobs numbers suggests that the U.S. economy may be heading to what some experts say is a soft landing, a scenario that points to a situation where the Federal Reserve's raising of rates manages to slow elevated inflation without damaging the economy and the jobs market.

"Spectacular report across the board. Huge beat in jobs, wages rising robustly, prime-age employment growing. It's the Energizer Bunny economy—it just keeps growing and growing and growing," Bharat Ramamurti, senior adviser for economic strategy at the American Economic Liberties Project and former deputy director of the National Economic Council, said in a note shared with Newsweek.

The Federal Reserve began hiking rates aggressively in March 2022 to battle inflation that had hit record highs. That tightening of monetary policy pushed up borrowing costs across the economy and experts expected that the economy would slow as a result, with some even predicting a recession, and employers would cool on hiring.

But the economy has repeatedly defied expectations. In the fourth quarter, growth accelerated at 3.3 percent fueled by robust consumer spending. Employers are still hiring even as the Fed's interest rates are at two-decade highs at the current range of 5.25 to 5.5 percent range. Meanwhile, inflation has slowed and is getting closer to the central bank's target of 2 percent.

"Today's stellar jobs report marks two straight years of unemployment below 4 [percent] and 18 months of cooling inflation, an achievement many economists did not think was possible," Bilal Baydoun, director of policy and research at think tank Groundwork Collaborative, said. "The data is very clear that we never had to sacrifice jobs for lower prices."

The Fed's preferred gauge for inflation, the personal consumption expenditures (PCE) index, hit 2.6 percent in December on a year-over-year basis. The core PCE index, which excludes fluctuating energy and food prices, increased by 2.9 percent for the year in December compared to 3.2 percent in November.

On Wednesday, Fed Chair Jerome Powell, after policymakers held rates for the fourth time in a row, lauded the economy and indicated that there was progress on inflation and signaled that the Fed may cut rates later this year.

"If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year," Powell said. "This is a good economy."

Analysts expect that the latest jobs data will add to the view at the Fed that they can hold rates for slightly longer to hit that 2 percent inflation goal.

"Today's report is likely to solidify views inside and outside the Federal Reserve that the labor market is solid, and the Fed can afford to hold rates higher for longer while building confidence that inflation has returned to its annual 2 [percent] target and will stay there," Kory Kantenga, LinkedIn's senior economist, said in a note shared with Newsweek.

The jobs report on Friday suggested that a rate cut in March was now unlikely, experts said, but that it did point to what Fed policymakers were hoping—lower inflation without damaging the economy.

"The job market holds the keys for future Fed policy. This morning's strong jobs report diminished the chances of the Fed cutting in March," Jeffrey Roach, chief economist for LPL Financial, said in a note.

Update 2/2/24, 11:15 a.m. ET: This article was updated with additional comments, background and context.