United States Unemployment Rate Falls to 3.4%
Despite fears of a recession and high-profile layoffs in the tech sector, the United States continues to add thousands of jobs. According to the latest U.S. Bureau of Labor Statistics report, the economy added 517,000 in January. That marks the best result since July of last year when 586,000 jobs were added to payrolls. Moreover, the result is nearly double the 260,000 jobs (adjusted up from the previously-reported 223,000) gained in December 2022.
The figure is far higher than the 185,000 figure that economists had expected. However, as Marketwatch notes, January reports have been known to be exaggerated by the government formula that adjusts for seasonality.
With the gain in payrolls, the unemployment rate dipped to 3.4%. This marked the first time that level has been reached since May 1969.
Elsewhere in the report, it was discovered that the average workweek among all employees on private nonfarm payrolls had increased during the month. In January, the average week was 34.7 hours, which was up 0.3 hours from the month prior. Looking specifically at the manufacturing sector, the average workweek increased 0.4 hours to reach 40.5 while overtime increased slightly to 3.1 hours.
Meanwhile, average hourly earnings also rose, growing 0.3% in the month. That amounts to 10¢ for a new total of $33.03. However, the year-over-year increase of 4.4% is down from the 4.8% seen in December. It is also far below the 6.5% YOY increase in the Consumer Price Index recorded in December.
This jobs report comes as the Federal Reserve has slowed its rate hikes — most recently increasing rates by a quarter point. Acknowledging this, chief global strategist of Principal Asset Management Seema Shah told CNN, “Is [Fed Chair Jerome] Powell now wondering why he didn’t push back on the loosening in financial conditions?” Shah added, “It’s difficult to see how wage pressures can possibly soften sufficiently when jobs growth is as strong as this, and it’s even more difficult to see the Fed stop raising rates and entertain ideas of rate cuts when there is such explosive economic news coming in.”
There’s no doubt that January’s jobs report came as a surprise to observers and counters much of the narrative that’s surrounded the economy in recent months. That said, as it has been pointed out, the blockbuster number could be somewhat inflated due to how such figures are calculated. Therefore, it will be interesting to see if the number ends up being adjusted in subsequent reports. Either way, one thing is clear: the U.S. economy is hard to predict these days.