# U.S. job growth powers ahead; unemployment rate at 3.4%
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-03
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: U.S. job growth surges in January, unemployment at
Meta Description: January marked a significant acceleration in job growth in the U.S., with the unemployment rate hitting a historic low of 3.4%. The tight labor market may pose
URL: https://financedigest.com/u-s-job-growth-powers-ahead-unemployment-rate-at-3-4html

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By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth accelerated sharply in January while the unemployment [rate hit a more than 53-1/2-year low](https://www.financedigest.com/interest-rates-are-cut-to-an-all-time-low-what-will-this-mean-for-small-businesses.html "Interest rates are cut to an all-time low. What will this mean for small businesses?") of 3.4%, pointing to a persistently tight labor market, and a potential headache for Federal Reserve officials as they fight inflation.

The Labor Department’s closely watched employment report on [Friday also showed job creation in the past year](https://www.financedigest.com/extraordinary-rollercoaster-good-friday-talks-remembered-25-years-on.html "‘Extraordinary rollercoaster’, Good Friday talks remembered 25 years on") was much stronger than previously estimated, suggesting the economy was nowhere near a recession. Though wage [growth is slowing](https://www.financedigest.com/uk-recruiters-slow-pace-of-pay-growth-in-march-rec-survey-shows.html "UK recruiters slow pace of pay growth in March, REC survey shows"), it was growing much faster than previously estimated in recent months.

The strength in hiring despite layoffs in the [technology sector](https://www.financedigest.com/why-its-time-to-centralise-public-sector-technology.html "Why it’s time to centralise public sector technology") as well as interest rate sensitive sectors like housing and finance keep the U.S. [central bank](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") on its monetary policy tightening path.

Not laying off workers due to shortages is one thing, but cranking up your staff is quite another,” said Sal Guatieri, a senior economist at BMO [Capital Markets](https://www.financedigest.com/digital-finance-unlocking-new-capital-in-disrupted-markets.html "Digital Finance: Unlocking New Capital in Disrupted Markets") in Toronto. If job growth remains strong and labor markets tighten further, this will compromise the [Fed’s goal of restoring price stability](https://www.financedigest.com/fed-in-spotlight-with-us-focus-on-stability-first-republic.html "Fed in spotlight with US focus on stability, First Republic"), leading to several more rate hikes that would ultimately be the economy’s undoing.

The survey of establishments showed [nonfarm payrolls](https://www.financedigest.com/dollar-tumbles-as-u-s-nonfarm-payrolls-show-mixed-picture.html "Dollar tumbles as U.S. nonfarm payrolls show mixed picture") surged by 517,000 jobs last month. [Data for December was revised higher to show 260,000 jobs](https://www.financedigest.com/stocks-mixed-dollar-gains-after-robust-inflation-jobs-data.html "Stocks mixed, dollar gains after robust inflation, jobs data") added instead of the previously reported 223,000. Economists [polled by Reuters](https://www.financedigest.com/european-central-bank-to-raise-deposit-rate-to-3-25-by-mid-year-reuters-poll.html "European Central Bank to raise deposit rate to 3.25% by mid-year: Reuters poll") had forecast payrolls rising 185,000, with estimates ranging from 125,000 to 305,000.

Employment growth [last](https://www.financedigest.com/fintech-trends-to-look-out-for-during-the-last-six-months-of-2019.html "Fintech trends to look out for during the last six months of 2019") month was well above the monthly average of 401,000 in 2022.

With January’s report, the Labor Department’s Bureau of Labor Statistics (BLS) [published its annual](https://www.financedigest.com/rawbank-publishes-its-2018-annual-report.html "RAWBANK publishes its 2018 Annual Report") payrolls “benchmark” revision and updated the formulas it uses to smooth the data for regular seasonal fluctuations in the establishment survey.

The [economy added 568,000 more jobs in the 12 months](https://www.financedigest.com/uk-factories-suffer-worst-month-since-may-2020-as-economy-stumbles-pmi.html "UK factories suffer worst month since May 2020 as economy stumbles – PMI") through March 2022 than previously reported. Revisions to payrolls data from April through December also showed more [jobs created](https://www.financedigest.com/italy-jan-jobless-rate-edges-up-to-7-9-with-35000-jobs-created.html "Italy Jan jobless rate edges up to 7.9%, with 35,000 jobs created") than previously estimated. The BLS revised its [industry classification system](https://www.financedigest.com/is-your-erp-system-industry-4-0-compatible.html "Is your ERP system Industry 4.0 compatible?"), which resulted in about 10% of employment reclassified into different industries.

Last month’s broad increase in [employment was led by the leisure and hospitality sector](https://www.financedigest.com/uk-employment-sector-set-for-huge-shift-over-1-5-million-people-to-trade-in-full-time-work-for-the-gig-economy.html "UK employment sector set for huge shift: Over 1.5 million people to trade in full-time work for ‘the gig economy’"), which added 128,000 job, with 99,000 of them in restaurants and bars. Employment in leisure and hospitality remains below its [pre-pandemic level](https://www.financedigest.com/fraport-sees-2023-passenger-traffic-at-80-90-of-pre-pandemic-levels.html "Fraport sees 2023 passenger traffic at 80-90% of pre-pandemic levels") by 495,000.

Professional and [business services](https://www.financedigest.com/lockdown-unlocked-testimonials-of-hospitality-businesses-reinventing-the-service-experience.html "Lockdown Unlocked:  Testimonials of hospitality businesses reinventing the service experience") employment rose by 82,000, with temporary help jobs rebounding 25,900 after declining for several months. Government payrolls jumped 74,000, boosted by the return of [striking university workers](https://www.financedigest.com/uks-royal-mail-workers-to-strike-in-run-up-to-christmas.html "UK’s Royal Mail workers to strike in run-up to Christmas") in California.

[Average hourly](https://www.financedigest.com/finance-sector-workers-average-lunch-hour-just-37-minutes-how-can-the-office-change-this.html "Finance Sector Workers’ Average ‘Lunch Hour’ Just 37 Minutes – How Can The Office Change This?") earnings rose 0.3% after gaining 0.4% in December. That lowered the year-on-year [increase in wages](https://www.financedigest.com/greece-to-increase-minimum-wage-again-before-election.html "Greece to increase minimum wage again, before election") to 4.4% from 4.8% in December. The [average workweek increased](https://www.financedigest.com/taylor-wimpey-espana-remain-cautiously-optimistic-as-average-selling-price-increases-by-20-4.html "Taylor Wimpey España ‘remain cautiously optimistic’ as average selling price increases by 20.4%") to 34.7 hours from 34.4 hours in December.

U.S. [stocks](https://www.financedigest.com/mutual-funds-vs-stocks-which-is-better.html "stocks") opened lower. The [dollar rose against a basket of currencies](https://www.financedigest.com/u-s-dollar-advances-vs-major-currencies-as-risk-appetite-fades.html "U.S. dollar advances vs major currencies as risk appetite fades"). U.S. [Treasury prices](https://www.financedigest.com/stocks-jump-as-treasury-yields-ease-and-oil-prices-sell-off.html "Stocks jump as Treasury yields ease and oil prices sell off") fell.

The BLS also incorporated new population estimates in the household survey, from which the [unemployment rate](https://www.financedigest.com/spains-unemployment-rate-inches-up-to-12-87-in-q4-2022.html "Spain’s unemployment rate inches up to 12.87% in Q4 2022") is derived. As such the unemployment rate of 3.4%, the lowest since May 1969, is not comparable to December’s [3.5% rate](https://www.financedigest.com/bank-of-england-raises-rates-to-3-5-says-inflation-has-peaked.html "Bank of England raises rates to 3.5%, says inflation has peaked").

The [Fed on Wednesday raised its policy rate](https://www.financedigest.com/fed-rates-up-boe-up-ecb-up-stocks-up.html "Fed rates up, BoE up, ECB up, stocks up") by 25 basis points to the 4.50%-4.75% range, and promised “ongoing increases” in borrowing costs. Fed Chair Jerome Powell told reporters that “the economy can return to 2% inflation without a [really significant downturn or a really big increase in unemployment.” With wages moderating and inflation](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel") trending lower, economists are increasingly agreeing with that sentiment.

Government [data this week](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week") showed there were 11 million job openings at the end of December, with 1.9 openings for every unemployed person.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)


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