The US economy added a stunning 353,000 jobs last month, according to Bureau of Labor Statistics data released Friday, registering a stronger-than-expected gain to kick off 2024 and underscoring the resilience of the US economy in an election year.
The unemployment rate remained at 3.7% from the month before. It’s the 24th consecutive month that the nation’s jobless rate has been under 4%.
“The fact that the unemployment rate has been below 4% for 24 months straight for the first time since 1967 is truly remarkable,” Joe Brusuelas, chief economist and principal at RSM US, told CNN. “And that’s the word I keep saying as I look through this report: ‘This is remarkable.’ ‘Remarkable,’ is the takeaway here.”
More than a year ago, it seemed all but certain that the labor market would feel the effects of — and potentially be reeling from — the Federal Reserve’s aggressive rate-hiking campaign. But 11 hikes and four pauses later, the US job market is registering one of the longest periods of expansion this century.
January’s job gains dashed market expectations for a Fed rate cut to come sooner than later, perhaps as early as March, and for the central bank to cut as many as six times in 2024. Investors’ probability for a March rate cut dropped from 38% to under 20% on Friday, according to the CME FedWatch Tool.
However, the stronger-than-expected tally should help boost Americans’ tepid sentiments about the economy. And it shouldn’t knock the Fed off its current path, with officials having telegraphed a trio of rate cuts to occur this year, Brusuelas said.
“The Fed’s going to have to manage expectations very carefully here going forward,” he said. Powell signaled that the central bank wants to cut — and now “It’s just matter of not if, but when.”
An upside surprise
Hiring accelerated from December, which itself had far stronger employment growth than previously estimated. December’s job gains were revised higher by 117,000 positions to total 333,000 for the month. November was revised up as well, but only by 9,000 jobs, to a 182,000 net job gain.
January’s gains blew economists’ expectations out of the water: Consensus forecasts had called for a net gain of 176,500 jobs last month, according to FactSet.
Still, economists have cautioned that the January report is among the trickiest to forecast because it’s typically a big month for job losses (with seasonal workers being let go after the holidays and other businesses doing some new year’s belt-tightening). Additionally, the BLS applies new seasonal adjustment factors at the start of the year to help smooth out the data and better understand the trends.
For these reasons, some economists told CNN this week that it’s possible January would deliver an upside surprise.
They got one.
Where the job growth occurred
Most major industries — mining and logging excluded — added jobs in January, BLS data shows.
Private education and health services continued to drive job growth with 112,000 job gains. Health care and social assistance accounted for 100,400 of those, followed by professional and business services at 74,000 and retail trade at 45,200.
The leisure and hospitality industry added a mere 11,000 jobs in January but registered its 36th consecutive month of job gains, BLS data shows. As of January, this critical service industry that was bludgeoned at the outset of the pandemic is a mere 0.4% (75,000 jobs) from reaching its February 2020 employment levels.
During the recovery from the pandemic, leisure and hospitality and other services businesses have benefited from Americans’ strong desires to spend money on experiences.
150+ applicants for 30 jobs
In Minneapolis, Jillian Hiscock had little problem finding the more than two dozen workers she needed for her new sports bar.
Hiscock is about a month away from opening A Bar of Their Own, a bar and restaurant that exclusively will show women’s sporting events. The concept, which was inspired by industry trailblazer The Sports Bra in Portland, Oregon, has garnered overwhelming support from the Twin Cities community since Hiscock floated the idea last spring and ran a crowdfunding campaign to get it off the ground.
The same was true for hiring efforts by A Bar of Their Own: She received 150 applications in two days’ time for 25 to 30 open positions.
“It’s a good problem to have, but I just wanted to make sure that we were being realistic about who we could actually communicate with, given our timeline,” she said. “But yeah, we had to turn it off in less than two days with over five times as many applicants as we needed for the positions we had available.”
The applicants came from all walks of life and included people who had experience in restaurants as well as folks who were out of work or looking to switch jobs or even careers.
“Since things have opened back up [following the pandemic], we’ve had a lot of folks whose relationships with work has fundamentally changed,” she said. “Showing up and just doing a thing for somebody that you feel doesn’t care about as a human is less interesting to people now, because we all know how quickly that can be taken away.”
People continue to want a better balance between their working life and personal life, she said.
“People were really excited about this, not just seeing this as another job, but seeing this as an opportunity to be a part of something bigger,” she said.
A banner year
The January jobs report also included the final figures for the BLS’ annual benchmark review of payroll data. US job growth last year was indeed weaker than initially estimated (by 266,000 jobs); however, that’s not as weak as the preliminary benchmark estimates suggested it could be.
Even with those revisions in play, 2023 was a banner year for job growth. Nearly 3.06 million jobs were added last year, seasonally adjusted data show. Outside of the record-shattering 2021 and 2022, that’s the highest annual jobs total since 1999 and the 17th largest on records that go back to 1939, BLS data show.
Also delivering a surprise were wage gains, which surged 0.6% for the month and 4.5% year-over-year.
“This elevates the risk that nominal wage growth will not fall back to levels consistent with reaching the inflation target on a sustained basis, particularly as the labor force participation rate refuses to rise any further,” Brian Coulton, Fitch Ratings’ chief economist, wrote in a note issued Friday. “Wages growing at this rate, in a labor market this tight, is a problem for the Fed.”
Burying the recession expectations
The strong labor market has been the foundation for the surges in consumer spending — and robust economic growth — that the United States has seen in recent months. And while businesses have reined in hiring, people are quitting less and wage gains have seen some easing, the slowing pace of inflation means that people’s paychecks are finally able to go further than they have in years.
However, despite the strong economy, Americans have been mostly downbeat — although attitudes are on the upswing. A new CNN poll released Friday showed that 35% of Americans say things in the country today are going well. That’s an improvement from the 28% who felt positively about the state of affairs last fall.
The poll found that the sentiment is heavily influenced by partisanship, with the uptick being led by Democrats.
While the estimated 4.5% annual hourly earnings growth reported Friday may trigger a dull headache for the Fed, it’s ultimately good for the American psyche, Brusuelas said.
“This should put the last of the recession calls six feet under,” he said. “It’s about jobs, and it’s about what people make, and this data reflects the increase in productivity. Improved productivity leads to improved number of jobs, better pay and rising living standards. It’s that mythical tide that lifts all boats.”
