Job growth surged past expectations, with nonfarm payroll employment growing by 353,000 in January, according to the U.S. Bureau of Labor Statistics (BLS). The BLS said the December jobs growth figure was also upwardly revised by 117,000.
“The jobs figure once again exceeded expectations, signaling an economy that remains hot despite numerous tech layoff announcements and sustained elevated interest rates,” says Nik Scoolis, manager, housing economics for Zonda.
Fannie Mae deputy chief economist Mark Palim says job growth was widespread across sectors, led by private education and health services (+112,000), professional and business services (+74,000), and retail trade (+45,200). The residential construction sector, including specialty trade contractors, added 2,700 jobs in January.
“With the introduction of annual benchmark revisions to past data, the level of payroll employment at the end of 2023 is now 115,000 higher than was previously reported, indicating that our view of the labor market is even more positive than we had previously believed,” Palim says.
The unemployment rate remained steady at 3.7% for the third straight month, while the number of unemployed people was little changed at 6.1 million. The number of those jobless for 27 weeks or more was also little changed, at 1.3 million, and accounted for 20.8% of all unemployed people.
The labor force participation rate in January was 62.5%, and the employment-population ratio was 60.2%, both little changed compared with the previous month. Average hourly earnings for employees rose by $0.19, or 0.6%, in January. Over the past 12 months, average hourly earnings have increased by 4.5%.
“The robust hiring may be double-edged for those hoping for cuts from the Fed in coming months,” Scoolis says. “Chairman Powell and the Federal Reserve Open Market Committee will interpret this data as confirmation the economy can continue to grow, further cementing a holding pattern.”
Palim shares a similar view as Scoolis, saying that if job growth continues at a strong pace, it could result in a slower pace of policy rate cuts by the Fed than what is projected.
“It could also present some upside risk to mortgage rates over the coming months, which would dampen increased housing demand coming from stronger job growth,” says Palim.
In January, the number of people not in the labor force who currently want a job was little changed at 5.8 million. Among those not those in the labor force who wanted a job, the number of people who believed no jobs were available for them increased to 452,000 in January.
