5 takeaways from a stunning January jobs report

Job growth surged faster than expected in January and wages rose faster than inflation, showing further strength at the start of an election year when the economy is likely to be a big factor.

The U.S. economy added 353,000 jobs last month, about twice as many jobs as economists had expected in various forecasts, according to the Labor Department. The unemployment rate remained unchanged at 3.7%.

Wages for nonfarm payrolls rose 0.6% to $34.55, double the monthly headline inflation rate in December.

annual wage growth That rose to 4.47%, much higher than the 3.5% growth rate that many economists believe is in line with the Fed’s 2% inflation target.

An unexpected turnaround in the labor market has been a hallmark of the post-pandemic economy, and the figures released by the Labor Department on Friday continue that trend.

Despite consistently strong employment and wage growth, consumer price index (CPI) inflation fell to 3.3% in December from a high of around 9% in 2022.

Here are five major points from January’s employment statistics.

The labor market shows no signs of cooling down.

January’s jobs report shows that the labor market has not yet cooled under the weight of the Fed’s interest rate hikes as many economists expected.

The large upward revisions in November and December are further evidence that the Fed’s rate hikes aimed at slowing the economy in line with inflation are doing little to weaken the job market.

December employment growth was revised upward from 216,000 to 333,000, and November employment growth was revised upward to 182,000 from January’s 173,000, adding an additional 12 to 2024 job growth. 6,000 people were added.

“An increase of 350,000 jobs in one month cannot be matched by a further cooling of the labor market. “This raises the risk that inflation will not return to levels consistent with achieving the inflation target on a sustained basis,” Fitch Ratings economist Brian Coulton said in a Friday article. Explanation.

Fed rate cut likely to be postponed

The strength of the labor market in January suggests to many market commentators that the expected Fed rate cuts will be delayed.

“The dramatic upside surprise in both employment and wage growth means that a March rate cut should be off the table for now,” Seema Shah, strategist at Principal Asset Management, said in an analysis. “And the interest rate cut in May means there is now a possibility of an ice age.”

“Indeed, when you look at numbers like these, the six or seven rate cuts that the market was pricing in seem very offside,” she wrote.

January’s numbers also call into question the timing of a so-called “soft landing” in which the economy returns to stable growth without a deep recession or a significant rise in unemployment.

Some economists, including Treasury Secretary Janet Yellen, say a soft landing has already been achieved amid the continuing economic crisis. international monetary fund He said it was just around the corner.

The Department of Commerce’s latest gross domestic product (GDP) report shows that GDP grew at an annualized rate of 3.3% in the fourth quarter of 2023, after increasing 4.9% in the third quarter of 2023, with the economy still in the This further suggests that the aircraft did not “land.”

More fuel for Biden’s economic propaganda against Trump

President Biden and former President Trump have been at odds over their economic performance as they focus on a rematch in November.

President Trump recognizes that a strong economy in 2024 could hurt his re-election chances, accusing Fed Chair Jerome Powell of politically motivated cuts to interest rates and stimulation of business activity. .

“I think he’s political,” Trump said in an interview on Fox Business Network’s “Morning with Maria,” which was recorded before the employment report was released.

Despite a recent spate of positive economic data, President Trump is predicting the economy will collapse within the next 12 months while simultaneously trying to take credit for the record stock market rally.

Biden has largely ignored the stock market rally and focused on strong job growth, lower inflation and higher real wages.

Although Mr. Biden’s economic approval rating is low, recent polls show that Americans’ views on the economy are on the rise, and the economic confidence index is on the rise. gallup and pew I have seen improvement over the past two months. Consumer sentiment is also skyrocketing. University of Michigan.

Will Democrats continue to pressure the Fed to lower rates?

On Friday morning, Democrats exulted in stronger-than-expected job growth.

“Our economy has lived up to expectations and is moving in the direction that naysayers said was impossible: sacrificing pay for growth,” said Representative Richard Neal (Massachusetts), the top Democrat on the House Ways and Means Committee. “It is moving us towards an inclusive and sustainable recovery that will continue to grow.” The commission boasted in a statement Friday.

But competing with Democrats’ enthusiasm are questions about whether the economy is still on track for more normal growth. Incumbent Democrats may prefer a less ambiguous soft-land scenario that would make it easier to cut rates and deliver a victory speech.

“Given today’s employment numbers, especially the stronger-than-expected average hourly wage, cutting interest rates prematurely in this economic climate could lead to a significant increase in inflation,” said Ivan Grull, co-chief investment officer at Avantax. may unnecessarily damage the

But progressive economists remain focused on lowering rates and hope that central bankers will heed their calls.

“High interest rates only slow the transition to clean energy and add to families’ debt. Chairman Powell needs to change his tune and lower rates in March,” said Bilal Baidoun, director of research at the Groundwork Collaborative. said in a statement Friday.

Concerns about economic recession become even more remote.

The good news for Democrats is that fears of a recession are even less justified than they were at the beginning of the year.

The widely anticipated 2023 recession and spike in unemployment did not materialize, allowing Democrats to boast about their economic performance in the face of skeptics.

“I was wrong about the economic slowdown and recession. So was the entire forecasting fraternity.” larry kudrow saiddirector of the White House’s National Economic Council (NEC) under the Trump administration, said Thursday on FOX Business Network.

Most market commentators simply abandoned calls for a recession because they didn’t materialize. Others have postponed it to 2024, while the January jobs report has been pushed back even further.

“Our economy added a staggering 353,000 jobs in January, pushing us back out of a long-awaited recession,” Ryan Detrick, a strategist at Carson Group, wrote in an analysis. “With the employment situation this strong, a recession is unthinkable.”

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