The economy crushed expectations in January and added 353,000 jobs, the Bureau of Labor Statistics reported Friday morning, showing that the labor market started 2024 on strong footing after defying fears of a recession throughout 2023.
The unemployment rate stayed the same at 3.7%. Unemployment remains low by historical standards.
The continued employment growth is good news for the White House, which has been working to credit President Joe Biden for the strong job creation over recent months, characterizing the underlying strength of the labor market and the broader economy as “Bidenomics” in action.
“It’s way better than expected. In fact, it’s so much better I’d call it incredible, as in maybe not entirely credible,” said Dan North, a senior economist with Allianz Trade Americas. North said the headline number might be revised down in the months ahead and that some seasonal distortions might be at play.
Friday’s report also showed the estimates for job creation in November and December being revised up by a combined 126,000. Job growth in recent months has been well above the rate needed to keep unemployment trending down over time.
Job growth was led by a 74,000 job increase in professional and business services. But the growth was broad-based, with payrolls growing in healthcare, retail, government, and manufacturing.
Wage growth was strong last month according to the report. Average hourly earnings increased by about double than what was anticipated, rising 0.6%. On an annual basis, wages popped 4.5%, above the 4.1% forecast.
In response to the strong labor market report, stock futures were down on Friday. That is because investors fear that stronger wage growth and jobs market tightness could mean that the Fed will hold interest rates higher for longer.
Both job creation and GDP growth have maintained momentum despite the Federal Reserve’s interest rate hikes.
The Fed has carried out an at-times aggressive tightening cycle in response to the inflation that has roiled households over the past few years. Since the central bank began hiking in March 2022, annual inflation, as tracked by the consumer price index, has fallen from a peak of about 9% in June 2022 to just 3.4% in December.
The Fed announced a decision this week to keep its interest rate target steady, a move that led investors to push back the timeline for expected rate hikes to May.
There is also a growing perception that the labor market and economy more broadly will avoid the sort of painful recession some economists had predicted the country would already be enmeshed in right now.
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The Fed predicts the unemployment rate will rise to 4.1% by the end of this year. Officials also predict a very modest 1.4% GDP growth in 2024.
GDP grew at a 3.3% annual rate in the fourth quarter of 2023, adjusted for inflation, bringing growth for the year to 2.5% in 2023.
