The U.S. economy added jobs at a robust pace in January, the latest surprise delivered by a labor market that has repeatedly defied predictions of a significant slowdown.
Employers added a seasonally adjusted 353,000 jobs last month, the Labor Department reported Friday, the strongest in a year. December’s payroll figures were also revised upward to 333,000 from 216,000, suggesting that higher interest rates haven’t cooled hiring as much as economists had previously thought.
The labor force grew 124,000 after accounting for the annual change to the Labor Department’s estimate of the underlying population, the Labor Department said. Without that adjustment, the labor force showed a decline. The participation rate in January was unchanged at 62.5%, with the population revisions having no effect.
Fed Chairman Jerome Powell signaled Wednesday that rate cuts are likely later this year, though probably not at the Fed’s next meeting in March. Strong economic growth and a still-tight labor market were welcome, Powell said, as long as inflation continues to decline.
Before Friday, recent data had shown the labor market cooling in a gradual manner, with wage growth easing and the pace of hiring moderating. A large share of hiring last year came from three sectors: government, healthcare, and restaurants and hotels. Other sectors have returned to a slower pace of growth.
Meanwhile, weekly initial claims for unemployment insurance have recently jumped, a sign that layoffs might have picked up, although not to levels economists consider worrisome.
Still, demand for workers has proved much more resilient than many investors and analysts had expected, given the Fed’s aggressive rate increases.
Officials raised rates last year to the highest level in more than 20 years, but the economy, far from falling into recession, has grown at a surprisingly brisk pace. The Fed’s preferred inflation gauge was 2.6% in December, not far from the central bank’s 2% goal.
Jobs reports for January have been somewhat hard to read since the onset of the pandemic. In the past two years, job gains were well above what economists had expected, but there was speculation that the numbers might have been exaggerated by shifts in seasonal hiring patterns.
Annual revisions to population estimates can also make it difficult to compare January’s unemployment rate with last year’s numbers
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