After months of declines in job growth, US employers changed course with massive hiring in January, adding 517,000 jobs (on a seasonally adjusted basis). The increase was the largest since July, surprising markets with its strength, and casting doubt about expectations of recession in America.
Underscoring the labour market’s strength was the unemployment rate, which fell to 3.4%, the lowest level since 1969. The participation rate was stronger too.
Reassuringly, for those worrying about inflation pressure, wages growth continued to moderate. Average hourly earnings increased just 0.3% from December (and 4.4% over the year), an indication that pay raises may be easing.
The report showed that job gains were broad, including restaurants, bars and hotels, and healthcare, sectors making a comeback from the pandemic. Professional and business services also ramped up their hiring.
The recovery in US jobs since the pandemic lockdowns
Source: Joseph Politano
The surge in hiring creates a predicament for the US Federal Reserve (Fed), which is trying to cool the labour market in its effort to tame inflation. By raising interest rates it hopes to force businesses to pull back on their spending, including hiring. Strong economic data might scare markets into thinking that the Fed’s job is far from over and that it might be forced to tighten more than expected. It is a delicate balance, and we won’t know how it unfolds until it happens. It’ll be interesting to observe whether Australian data follows a similar trajectory.
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