2024-02-02 13:41:00
(CNN) — The US economy added a surprising 353,000 jobs during January, according to data from the Bureau of Labor Statistics (BLS) released this Friday, recording a larger-than-expected increase at the start of 2024.
The unemployment rate remained at 3.7% compared to the previous month. It is the 24th consecutive month that the country’s unemployment rate has been below 4%.
“The fact that the unemployment rate has been below 4% for 24 months in a row for the first time since 1967 is truly remarkable,” Joe Brusuelas, chief economist and director of RSM US, told CNN Business. “And that’s the word I keep saying as I read this report: ‘Extraordinary’. Extraordinary’ is the conclusion here.”
More than a year ago, it seemed almost certain that the labor market would feel the effects of the Federal Reserve’s aggressive rate-hiking campaign (and potentially reel from it). But 11 gains and four pauses later, the U.S. labor market is seeing one of the longest periods of expansion this century.
January’s job gains dashed market expectations that the Federal Reserve would cut rates sooner rather than later, perhaps as early as March, and that the central bank would cut rates as much as six times in 2024. Investors’ likelihood of a rate cut in March fell from 38% to less than 20% this Friday, according to the CME FedWatch tool.
However, the higher-than-expected figure should not derail the Fed from its current path, as officials have telegraphed a trio of rate cuts that will occur this year, Brusuelas said.
“The Federal Reserve will have to manage expectations very carefully going forward,” he said. Powell noted that the central bank wants to make cuts, and now “the question is not if it will happen, but when.”
A positive surprise
Most industries added jobs last month, with health care and social assistance posting the biggest gains of 100,400, according to the BLS.
Hiring accelerated starting in December, when job growth was much higher than previously estimated. December employment gains were revised upward by 117,000 positions for a total of 333,000 for the month. November was also revised upward, but by only 9,000 jobs, to a net increase of 182,000.
January’s gains dashed economists’ expectations: Forecasts had predicted a net gain of 176,500 jobs last month, according to FactSet.
Still, economists have warned that January’s report is one of the trickiest to forecast because it’s typically a month with big job losses (with seasonal workers laid off following the holidays and other companies tightening their belts in the New Year). Additionally, the BLS applies new seasonal adjustment factors at the beginning of the year to help smooth the data and better understand trends.
For these reasons, some economists told CNN this week that it was possible that January might offer a bullish surprise. It happened like that.
Also a surprise were wage gains, which rose 0.6% on the month and 4.5% year over year.
“This raises the risk that nominal wage growth will not fall back to levels consistent with meeting the inflation target on a sustained basis, particularly as the labor force participation rate refuses to rise further,” wrote Brian Coulton , chief economist of Fitch Ratings in a note published this Friday. “For wages to grow at this rate, in such a tight labor market, is a problem for the Federal Reserve.”
This story is developing and will be updated.
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