U.S. job growth accelerated amid modest pay increases
Job growth in the U.S. increased sharply in January. This comes against a backdrop of continued strength in the labor market. This further slowdown in pay increases should give the Federal Reserve some confidence in its fight against inflation.
The Labor Department’s closely watched review of company data released Friday showed that nonfarm payrolls rose by 517,000 jobs last month.
Data for December were also adjusted upward, showing an addition of 260,000 jobs, instead of the previously reported 223,000.
Average hourly earnings rose 0.3% after December’s 0.4% increase.
Annual wage growth thus declined from 4.8% to 4.4% in December.
Many economists had predicted that wages and salaries would rise 4.3% year-over-year and jobs would increase by 185,000 (Forecasts ranged from an increase of 125,000 to 305,000 jobs).
In its January report, the Labor Department’s Bureau of Labor Statistics (BLS) released its annual “benchmark” wage revision and updated the formulas the Bureau uses to smooth out regular seasonal fluctuations in company survey data.
The bureau also revised its industry classification system, resulting in about 10 percent of jobs being reclassified and assigned to other industries. In addition, new estimates of the population by household have been introduced, which is the basis for calculating the unemployment rate.
As a result, the unemployment rate in January was 3.4%, down from 3.5% in December.
The jobs report allows the U.S. central bank, focused on curbing wage inflation, to maintain a moderate pace of rate hikes and reduce the risk of recession this year.
Fed Chairman Jerome Powell told reporters Wednesday that “the economy can return to 2 percent inflation without a significant recession or a large increase in unemployment.”
With wages declining and inflation trending downward, economists agreed.
Government data this week showed that at the end of December there were 11 million job openings, or – 1.9 job openings for every unemployed person in the country.
The Fed on Wednesday raised the discount rate by 25 basis points to a range of 4.50-4.75%, promising to “keep raising” the cost of borrowing.
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