Total nonfarm payroll employment rose by 517,000 in January, a significant increase after job growth of 223,000 in December, according to the latest jobs report from the U.S. Bureau of Labor Statistics (BLS). Job growth last month reversed a trend of five consecutive months of deceleration. Job growth was led by gains in leisure and hospitality (+128,000), professional and business services (+82,000), and health care (+58,000).
“The employment market started 2023 with a significant and surprising surge,” says Zonda chief economist Ali Wolf. “Despite the well-publicized layoffs in information and technology, the economy added 500,000 jobs in January, well above expectations. The big numbers come shortly after this week’s FOMC meeting, which subtly implied a more dovish tone. Today’s release may indicate the Fed’s job is far from done in terms of cooling the still hot economy and reeling in inflation.”
The unemployment rate edged down to 3.4% in January, the lowest reading since 1969, according to Fannie Mae chief economist Doug Duncan. The count of unemployed persons remained little changed at 5.7 million in January.
“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,” says Mike Fratantoni, senior vice president and chief economist of the Mortgage Bankers Association. “As strong as we thought the job market was, it was even stronger.”
The number of long-term unemployed—those jobless for 27 weeks or more—was essentially unchanged at 1.1 million in January and accounted for 19.4% of the total count of unemployed.
The employment-population ratio, 60.2%, and the labor force participation rate, 62.4%, were unchanged in January after removing the effects of the annual adjustments to the population controls, according to the BLS. Both measures have shown little net change since early 2022 but remain below their pre-pandemic February 2020 levels.
“The decline in wage growth to 4.4% may be reflecting some of this shift to sectors that typically are lower wage,” Fratantoni says. “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.”
The number of persons not in the labor force who currently want a job was 5.3 million in January, relatively unchanged on a month-over-month basis. Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force—individuals who want and are able to work and have looked for a job in the prior 12 months but had not looked for work in the four weeks preceding the Household Data survey—also changed little in January at 1.4 million. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, also was little changed month over month at 342,000.
Residential construction employment, including specialty trade contractors, grew by 5,500 in January. Duncan says further employment growth will be needed to help home builders fulfill existing orders.
“Overall, we expect a mixed market reaction to today’s unexpectedly strong numbers, especially given comments by the Federal Reserve regarding its ongoing concerns about labor market tightness, which this morning’s report does not dispel,” says Duncan. “Furthermore, we believe today’s numbers, both in terms of the strong January job growth figure as well as the revisions to prior months following the BLS' annual benchmarking process, reduce the likelihood of a recession beginning in the first quarter.”
