The U.S. added 517,000 jobs in January, and the unemployment rate saw a minor decrease to 3.4%, according to the latest Employment Situation Summary from the U.S. Bureau of Labor Statistics.
The analysis found that along with the unemployment rate, the number of unemployed persons, at 5.7 million, changed little in January. The unemployment rate has shown little net movement since early 2022.
In addition, the analysis reported that job growth in January was widespread, led by gains in leisure and hospitality, professional and business services, and healthcare. Employment numbers also increased in government, partially reflecting the return of workers from a strike.
Key findings:
- Leisure and hospitality added 128,000 jobs compared with an average of 89,000 jobs per month in 2022. Over the month, food services and drinking places added 99,000 jobs, while employment continued to trend up in accommodation (+15,000). Employment in leisure and hospitality remains below its pre-pandemic February 2020 level by 495,000, or 2.9%.
- Employment in professional and business services rose by 82,000, led by gains in professional, scientific and technical services (+41,000). Job growth in professional and business services averaged 63,000 per month in 2022.
- Government employment increased by 74,000. Employment in state government education increased by 35,000, reflecting the return of university workers after a strike.
- Employment in retail trade rose by 30,000, following little net growth in 2022 (an average of +7,000 per month). Job gains in general merchandise retailers (+16,000) and in furniture, home furnishings, electronics and appliance retailers (+7,000) were partially offset by a decline in health and personal care retailers (-6,000).
- Construction added 25,000 jobs, reflecting an employment gain in specialty trade contractors (+22,000). Employment in the construction industry grew by an average of 22,000 per month in 2022.
- Transportation and warehousing added 23,000 jobs, the same as the industry’s average monthly gain in 2022. Over the month, employment in support activities for transportation increased by 7,000.
- Average hourly earnings for all employees on private nonfarm payrolls rose by 0.3%, to $33.03. Over the past 12 months, average hourly earnings have increased by 4.4%. Average hourly earnings of private-sector production and nonsupervisory employees rose by 0.2%, to $28.26.
- Both the labor force participation rate, at 62.4%, and the employment-population ratio, at 60.2%, were unchanged. These measures have shown little net change since early 2022 and remain below their pre-pandemic February 2020 levels (63.3% and 61.1%, respectively).
Major takeaways:
MBA SVP and Chief Economist Mike Fratantoni commented:
“The pace of job growth had been trending down over the past six months, but January broke that trend. Recent data on unemployment insurance claims have indicated a stronger job market than the string of layoff announcements from the technology and financial sectors would suggest. Job growth of 517,000 in January, and a drop in the unemployment rate to 3.4%, puts an exclamation point on the divergence between measures of economic activity and job market statistics.
“Much of the job growth is concentrated in sectors like leisure and hospitality, which have struggled to fill job openings for much of the past year. The decline in wage growth to 4.4% may be reflecting some of this shift to sectors that typically are lower wage. However, slower wage growth in the service sector is the trend that Federal Reserve officials have been seeking, despite the persistent strength in the job market.
“Beyond the surprising hiring jump in January, employment numbers were revised up for 2022 by about half a million and were marked up for the last two months as well. As strong as we thought the job market was, it was even stronger.
“With the job market this tight, the Federal Reserve and financial markets will remain even more focused on the inflation data. We expect another 25 basis-point increase in the federal funds target in March, but do anticipate that the unemployment rate, which does tend to be a lagging indicator, will increase through the course of the year.”
NAR Chief Economist Lawrence Yun commented:
“Despite the announced layoffs in Big Tech, Wall Street and the mortgage industry, total job gains have been more significant. In January, net new payroll job gains (those receiving steady W-2 statement salaries) totaled 517,000. Net job gains should continue because there are far more job openings than the number of unemployed searching for jobs. Even in the tech sector, those that have lost their jobs are reportedly finding new ones within three months with a comparable salary. Job gains are always good. Home sales and jobs are related over the long term. That is why the South and the Rocky Mountain regions are seeing more robust home sales gains over the long haul due to faster job growth compared to the rest of the country. But over the short-term, mortgage rates matter more. Robust job data will raise the prospect of consumer price inflation and the need for a more aggressive monetary policy to rein in inflation. So just as mortgage rates were trending down towards 6%, there could be a temporary rise. Still, rents are expected to calm down due to active apartment construction. That will help lower the broader consumer price inflation and halt Fed rate increases by summer. Mortgage rates can then go below 6%.”
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