US Economy Adds 517,000 New Jobs in January as Fed Tightening Fails to Cool Labor Market

NTD Newsroom
By NTD Newsroom
February 3, 2023Business News
US Economy Adds 517,000 New Jobs in January as Fed Tightening Fails to Cool Labor Market
A person walks past a "Join our team today!" sign posted at a UPS store amid a still-robust labor market in Los Angeles, Calif., on Feb. 2, 2023. (Mario Tama/Getty Images)

The U.S. economy created 517,000 new jobs in January, up from an upwardly revised 260,000 in December, according to the Bureau of Labor Statistics (BLS). This is also higher than economists’ expectations of 185,000.

The unemployment rate dipped to 3.4 percent, down from 3.5 percent and below the market estimate of 3.6 percent.

Average hourly earnings eased to 4.4 percent year-over-year, down from 4.9 percent in December. This also beat market forecasts of 4.3 percent. On a month-over-month basis, average hourly earnings rose 0.3 percent, down from 0.4 percent. Average weekly hours rose to 34.7.

The labor force participation rate also edged up to 62.4 percent, up from 62.3 percent.

The leisure and hospitality sector led the way, with 128,000 new jobs in January. This was followed by professional and business services (82,000), government (74,000), health care (58,000), and retail (30,000). The construction industry added 25,000 jobs and the transportation and warehousing sector created 23,000 positions. Employment in social assistance increased by 21,000. Payrolls were little changed in mining, wholesale trade, information, and financial activities.

The number of people employed part-time for economic reasons was flat at 4.1 million. The number of people not in the labor force who currently want a job was also little changed at 5.3 million.

There was another divergence between the household and establishment surveys in the BLS report. The household survey showed that there were 265,962 new jobs last month, up from 264,844 in December.

People working two or more jobs stayed roughly the same at above 8 million.

Financial markets declined following the data, as the leading benchmark indexes were in the red. The U.S. Treasury market was up across the board, with the benchmark 10-year yield up more than 8 basis points to around 3.48 percent.

The U.S. Dollar Index (DXY), a measurement of the greenback against a basket of currencies, spiked on the news, rising 0.5 percent to above 102.00.

A Prelude to NFP Data

Before the BLS release of the January jobs report, a plethora of data highlighted a potential softening of the U.S. labor market to kick off 2023.

The most notable finding occurred on Thursday when it was reported that U.S.-based employers announced plans to terminate close to 103,000 workers in January, up from 43,651 in December. This was the highest total since September 2020 and the biggest January print since 2009. The layoffs were driven by technology (41,829), retail (13,000), and real estate (2,191). Companies cited the economic slowdown as a reason for slashing workers and slowing hiring.

“We’re now on the other side of the hiring frenzy of the pandemic years,” said Andrew Challenger, a labor expert and Senior Vice President of Challenger, Gray & Christmas, Inc., in a statement.

Payroll processor ADP confirmed in its monthly National Employment Report that the private sector added 106,000 jobs last month, down from 253,000 in December. It was also below the market estimate of 178,000.

However, many market analysts were surprised by the enormous increase in the number of job openings in December, climbing to above 11 million. The openings to unemployed individuals ratio also increased close to an all-time high of 1.9, up from 1.2 before the coronavirus pandemic. The job quit rate was also relatively unchanged.

According to the National Federation of Independent Business (NFIB), 57 percent of employers were hiring or trying to hire. But 91 percent noted that there were few or no qualified applicants for the job openings.

This is becoming “a major concern” for smaller companies in 2023, says NFIB Chief Economist Bill Dunkenberg.

“Small businesses’ sales opportunities are limited because of the staffing shortage but owners continue to make changes in business operations to compensate,” he said in the report.

EJ Antoni, a research fellow for Regional Economics in the Center for Data Analysis at The Heritage Foundation, recently explained that people are not returning to the workforce at the numbers they did before the COVID-19 public health crisis. When assessing the rate of the population that participated in the labor market and the percentage of the population that is employed, the levels remain below pre-pandemic levels, he noted.

Meanwhile, the NFIB research learned that the percentage of owners expressing labor quality as their chief business operating challenge continues to be elevated at 24 percent. Labor costs are also a persistent problem for employers, with 10 percent calling it their single most important problem they face, which is hovering around the highest readings in nearly five decades.

Unit labor costs eased to 1.1 percent in the fourth quarter and non-farm productivity advanced to 3 percent in the October-to-December period, BLS data show. The Employment Cost Index (ECI) slowed to 1 percent in the three months ending in December, although it edged up to 5.1 percent year-over-year.

Initial jobless claims also eased to 183,000 for the week ending Jan. 28, down from 186,000 in the previous week, the Department of Labor reported (pdf). The four-week average, which eliminates week-to-week volatility, fell below 192,000. Continuing jobless claims slipped to 1.655 million, down from 1.666 million.

Morning Consult published its latest U.S. Jobs and Labor Report. It revealed that employed adults are looking for new positions, despite growing recession risks and layoffs. In addition, job insecurity increased among high-income workers last month, but low-income employees felt more secure about their employment situation.

The report also revealed that the share of finance and technology workers applying for work has tumbled and most professionals in these fields anticipate an income or pay loss in the next four weeks.

In the end, it will be a wait-and-see scenario to determine if the “worst-case scenario comes true,” says Jill Gonzalez, a WalletHub analyst.

“The U.S. economy is expected to grow very little in 2023. This would lead to a jump in unemployment to as high as 4.6 percent, according to the Federal Reserve. Both of these things would be signs of the Fed continuing to try and get a handle on inflation,” she said in a report. “If this ‘worst-case scenario’ comes true, it could mean that millions of people who now have jobs could wind up unemployed.”

From The Epoch Times

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