US adds unexpected 517K jobs to start the new year

Unemployment rate dips to just 3.4%, a level that’s not been seen since 1969

WASHINGTON — For nearly a year, the Federal Reserve has been on a mission to cool down the job market to help curb the nation’s worst inflation bout in four decades.

The job market hasn’t been cooperating. Consider what happened in January: The government said Friday that employers added a sizzling 517,000 jobs last month and that the unemployment rate dipped to 3.4%, the lowest level since 1969.

The job gain was so large it left economists scratching their heads and wondering why the Fed’s aggressive interest rate hikes haven’t slowed hiring at a time when many foresee a recession nearing.

Friday’s report added instead to the picture of a resilient U.S. labor market, with low unemployment, relatively few layoffs and many job openings. Though good for workers, employers’ steady demand for labor has also helped accelerate wage growth and contributed to high inflation.

Still, the Fed’s inflation watchers might be reassured somewhat by January’s wage data: Average hourly pay rose 4.4% last month from a year earlier, slower than the 4.8% year-over-year increase in December. And from December to January, wages rose 0.3%, below the 0.4% increase the previous month.

On top of the job growth it reported for January, the government on Friday also revised up its estimate of the gains in November and December by a combined 71,000.

President Joe Biden called the jobs report “strikingly good news” and asserted that his Republican critics were wrong in their warnings of continued high inflation and a coming recession and layoffs.

“Our plan is working,” Biden said, “because of the grit and resolve of the American worker.”

January’s hiring gain, which far exceeded December’s 260,000, was broad-based across industries. A category that includes restaurants and bars added 99,000 workers. Professional and business services jobs, including bookkeepers and consultants, rose by 82,000.

Governments added 74,000, boosted by the end of a worker strike against California’s state university system. Health care added 58,000 jobs, retailers 30,000. Construction gained 25,000 jobs. Manufacturing added 19,000.

The Fed has raised its key rate eight times since March to try to slow the job market and contain inflation, which hit a 40-year high last year but has slowed since then.

Yet companies are still seeking more workers and are hanging tightly onto the ones they have. Putting aside some high-profile layoffs at big tech companies like Microsoft, Google, Amazon and others, most workers are enjoying an unusual level of job security even at a time when many economists foresee a recession approaching.

For all of 2022, the economy added a sizzling average of roughly 375,000 jobs a month. That was a pace vigorous enough to have contributed to some of the painful inflation Americans have endured.