The U.S. added 517,000 jobs in January, more than two and a half times what economists anticipated, as the unemployment rate nudged down to 3.4%, the Bureau of Labor Statistics (BLS) reported last Friday.
Economists had predicted that the nation would add roughly 187,000 jobs, and that the unemployment rate would nudge up to 3.6% from 3.5%, roughly where it has lingered for the past several months, The Wall Street Journal reported. Previously, Federal Reserve Chair Jerome Powell had estimated that the unemployment rate would climb to roughly 4.6% by the end of 2023, as markets slowed in response to the Fed’s anti-inflationary campaign of interest rate hikes, in a Dec. 14 press conference.
At 3.4%, the unemployment rate hit the lowest level since May 1969, as “widespread” job growth, led by 128,000 jobs added in the leisure and hospitality sector, pushed January’s job growth past the 2022 year-long average 401,000 jobs per month, according to the BLS.
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Government employment was also a major contributor to job growth, with 74,000 jobs added, although this number was buoyed by 35,000 striking university workers returning to work.
The number comes just days after payroll firm ADP reported that private payrolls grew by an estimated 106,000 jobs in January, led by 95,000 additions in the leisure and hospitality sector.
“I don’t think there’s any doubt that the unemployment rate will rise this year considering that the current 3.5% rate matches the half-century low reached just prior to the pandemic and that the Fed needs to continue raising rates to counter excessive inflation,” Heritage Foundation senior fellow Rachel Greszler told the Daily Caller News Foundation. “What will matter most is whether the rise in the official unemployment rate comes primarily from layoffs or from people rejoining the workforce.”
In terms of the overall unemployment rate, significant layoffs would have a similar impact to a significant return to the labor force, Greszler told the DCNF. With the BLS reporting roughly 11 million job openings in the U.S., Greszler estimates that as many as 2.8 million workers may rejoin the labor force, “adding to the economy and reducing welfare costs.”
A variety of companies, including shipping giant FedEx and electric vehicle company Rivian, announced layoffs this week, the WSJ reported.
“The labor market is going to cool pretty considerably in 2023,” Jonathan Pingle, chief U.S. economist at investment bank UBS told the WSJ. “We’re expecting an economic contraction to unfold over the latter three quarters of the year.”
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