US sees surprise hiring surge as unemployment edges down
US job gains surged unexpectedly last month as unemployment slipped to its lowest rate in more than five decades, government data showed, indicating strength in the labor market despite efforts to ease economic activity.
This could prove concerning to policymakers, with risks that elevated wages could feed into inflation.
While the US central bank has tempered its aggressive campaign to rein in prices on signs that the world's biggest economy is cooling, the latest figures could steer it towards more interest rate hikes than expected.
The United States defied expectations to add 517,000 jobs in January, nearly double the December figure, after a fivemonth slowdown in hiring, said the Labor Department on Friday.
"Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care," the report added.
Employment in manufacturing and construction showed resilience as well, despite a
slowdown in activity in both sectors.
The jobless rate edged down to 3.4 per cent, a level last seen in 1969, according to government figures.
But wage growth slowed slightly with average hourly earnings rising by 0.3 per cent to US$33.03, down from December's 0.4 per cent increase.
Taken together, these figures suggest the labor market remains too hot for policymakers,
with the hiring figure marking a spike from December's 260,000 number.
US President Joe Biden cheered the strong job creation since he took office and noted that inflation was still cooling off. He pushed back against critics who, he says, suggest that "the only way to slow down inflation was to destroy jobs."
"Today's data makes crystal clear... these critics and cynics are wrong," he told reporters, though conceding there remains more work to do.
"The data show the economy is creating jobs at a rapid pace," said Rubeela Farooqi of High Frequency Economics.
Job creation is showing "no sign of softening" she added, despite the Fed's eight consecutive hikes to the benchmark lending rate, aimed at easing demand and bringing down costs.
"Wage growth has slowed, but it has not yet slowed enough for the Fed," added Ian Shepherdson at Pantheon Macroeconomics.
The Federal Reserve has been closely eyeing the jobs market, with labor demand exceeding the supply of available workers and employers keen to retain staff they may have struggled to find during the pandemic.
While unemployment is typically seen to edge up as interest rates rise and borrowing costs go up, the jobless rate has hovered at historically low levels in recent months.
Wages are "still at a high level," Fed Chair Jerome Powell told reporters Wednesday.