Employers added a stunning 517,000 jobs in January, indicating the job market remains red-hot despite rising layoffs in the technology industry and the Federal Reserve’s concerted push to slow economic growth.
The figure, released on Friday by the Department of Labor, far outpaced economists’ expectations of about 185,000 jobs to be added in January.
The nation’s unemployment rate ticked down to 3.4%, its lowest level since 1969.
“The robust 517,000 gain in non-farm payrolls in January means that, despite most leading indicators of recession flashing red, the economy is clearly not as close to recession as we had suspected,” Andrew Hunter, senior U.S. economist with Capital Economics, said in a report.
The government also revised estimates for 2022 to show that the economy added 568,000 more jobs than initially estimated.
The leisure and hospitality sector led January’s payroll gains, adding 128,000 jobs, followed by professional and business services with 82,000 and health care with 79,000. The payroll gains were padded by a large gain in government jobs, partly due to an end to a strike at the University of California that had seen 48,000 walk off the job.
Employment in the information sector, which contains many technology companies, fell by 5,000, equal to its decline in December. Many large tech companies have been cutting headcount, with high-profile layoffs at Amazon, Alphabet, Meta and Microsoft.
“We’re still in a very strong, tight labor market. The demand for workers remains high,” John Leer, chief economist at Morning Consult, told CBS MoneyWatch before the job numbers were released.
“While the tech sector does play an outsized role in driving productivity and corporate earnings, it remains a fairly small share of total employment,” he added. “For all these folks that are being fired, many of them are being re-hired, reabsorbed elsewhere.”
Wage growth cooling
Stock futures fell on the blockbuster figures. Futures for the Dow fell 0.5% while the S&P 500 slipped 1%. Futures for the tech-heavy Nasdaq tumbled 1.8% in off-hours trading after three technology bellweathers — Apple, Amazon and Alphabet — posted lackluster quarterly results after Thursday’s close.
Wall Street is worried that the overly strong job growth will prompt the Federal Reserve to push interest rates higher, which hurts stocks. However, the Fed might be comforted by figures showing that wage growth decelerated in January, with average wages rising at an annual rate of 4.4%.
“Today’s report will also throw more kindling on the raging debate about how the Federal Reserve should think of the relationship between the labor market and inflation,” Nick Bunker, head of economic research at the Indeed Hiring Lab, said in an email. “If the central bank thinks that the low unemployment rate will necessarily push up wage growth and inflation moving forward, this strong report may darken the economic outlook. But if instead, Chair Powell and colleagues are heartened by tempering wage growth, then the odds that the economy can avoid a recession increase.”
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