Too Hot to Handle: America Created 517,000 Jobs in January and Unemployment Fell to 3.4%
Facts
- On Friday, the US Dept. of Labor's latest jobs report showed 517K new jobs were created last month, far exceeding the expectations of most economists. Even after the December 2022 jobs report was revised, it showed just 260K jobs created.
- At the same time, the unemployment rate fell to 3.4% — its lowest point since 1969.
- In its continued effort to recover from the COVID pandemic, the leisure and hospitality sector saw the greatest increase in jobs, adding 128K workers in January. Bars and restaurants led the way with 98.6K workers added in that sector, while hotel jobs increased by 14.8K.
- Stocks dropped by more than 100 points in reaction to the jobs news because the hot labor market is expected to encourage the US Federal Reserve to continue to raise its benchmark interest rate.
- This news indicates that increased job growth may increase consumer spending and wages — putting additional pressure on inflation, which has retreated from a 40-year peak but still remains high.
- In announcing a quarter-point hike in its benchmark rate earlier this week, Fed Chair Jerome Powell said there could be some additional rate hikes in the future. The next Fed meeting will be in March.
Spin
Republican narrative
The Fed’s plan to bring inflation down to 2% is failing. Raising interest rates to cool the economy and create less demand for labor isn’t working. It can take some solace that wage increases have slowed by a small percentage, but that’s not likely to continue. A new approach is needed.
Democratic narrative
We have to look at the positives. Since Biden took office, the economy has added a record 12.1M jobs. There have been fewer layoffs than expected because employers are expecting the economy to bounce back later in the year and don’t want to risk being shorthanded. These are promising economic times for the US.
