US economy smashes expectations with January job gains

Employers added 353,000 jobs last month as Federal Reserve ruled out March rate cuts

A recruitment sign in New York. US employers were expected to add 185,000 jobs in January. AFP
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The US economy beat expectations in January, starting the year with a hotter-than-expected jobs report as the Federal Reserve ruled out cutting interest rates in March.

Employers added 353,000 jobs last month, higher than an upwardly revised 333,000 job gains in December, the Labour Department reported on Friday.

US employers were expected to add 185,000 jobs in January, according to a Wall Street Journal survey of economists.

The unemployment rate remained unchanged at a near-historic low of 3.7 per cent.

Job gains were made in professional and business services, health care, retail trade and social assistance, the department reported. Losses occurred in mining, quarrying and oil and gas extraction.

Meanwhile, wage gains rose 0.6 per cent in January and 4.5 per cent year-on-year.

Friday's report is the first major piece of economic data since this week's Federal Reserve meeting, where chairman Jerome Powell ruled out cutting interest rates in March.

The Fed has raised interest rates 11 times since March 2022 to its current target range of 5.25 to 5.50 per cent - a 23-year high. It was expected that, by doing so, the US would see an increase in unemployment.

But that has not yet happened, with the unemployment rate sitting at a near-historic low for months. That has led the Federal Reserve to believe it can achieve its inflation goal without widespread job losses.

At the same time, consumer spending has remained resilient and the economic growth grew by 3.3 per cent in the final quarter of 2023, outperforming the Fed's expectations.

"Let's be honest, this is a good economy", Mr Powell told reporters this week.

Mr Powell said central bank policymakers need to see continuing evidence that inflation was moving down towards its 2 per cent goal.

Part of that picture is inflation. The Fed's preferred gauge showed inflation is at 2.9 per cent, still above the central bank's target.

But he also discussed the jobs market, saying wage growth and job openings were not where they need to be.

However, he did acknowledge the labour market was coming back into balance after previous readings showed the economy was not putting up as strong numbers versus a year ago.

“The labour market is rebalancing. Job creation has slowed the pace of job growth has narrowed,” he told reporters on Wednesday.

A separate report from the Labour Department earlier this week showed job openings hit their highest level in three months, showing that the jobs market remains strong.

Employers posted nine million job openings last month, according to the department's Job Openings and Labour Turnover Summary.

Updated: February 02, 2024, 2:08 PM