Job creation shoots up by surprise in the United States in January and unemployment falls to 3.4%

The labor market in the United States does not cool even with the rise in interest rates.

The world's leading economy created 517,000 jobs in the first month of 2023. It is a pace that more than doubles analysts' forecasts (around 185,000) and much higher than what the Federal Reserve would like to see to ward off the threat for inflation to pick up.

With the new data published this Friday by the Office of Labor Statistics, the unemployment rate stands at 3.4%, the lowest in half a century.

“Job growth was broad-based in January, led by gains in leisure and hospitality, professional and business services, and healthcare.

Employment also increased in public administrations, partly as a result of the return of workers after a strike, ”explains the statistical office under the Department of Labor.

The 517,000 jobs in January are the highest figure since July of last year and the best data for a month of January in at least the last decade.

As if that were not enough, the Bureau of Labor Statistics has revised upward the job creation data for November and December, which now stands at 290,000 and 260,000, respectively.

Federal Reserve Chairman Jerome Powell is trying to cool demand with interest rate hikes to ease the pressure on prices.

Inflation closed 2022 at 6.5%, below the high of 9.1% in the middle of the year, but clearly above the level of 2% that is targeted for price stability.

After the last monetary policy meeting, this week, the central bank placed interest rates at 4.5%-4.75%, the highest in 15 years, but warned that they would continue to rise.

After today's data, there are still fewer doubts that the next rise will come at the March meeting.

salary moderation

The only piece of information that can offer Powell some consolation is that wage increases continue to slow their year-on-year pace.

In January they increased by 0.3% and the rate for the last 12 months drops to 4.4%.

The uninterrupted 25-month streak of job creation coincides with the time Joe Biden has been in office.

Between 2021 and 2022, 11.3 million jobs have been created, to which is added last month's figure, in the heat of the recovery from the pandemic and a favorable inertia that has not yet stopped.

After the two years of greatest job creation ever recorded, unemployment has dropped from 6.7% to the current 3.4%.

The labor shortage is being influenced by factors such as early retirement, the higher cost of child care, the increase in transport costs and the reduction in immigration, which reduce the active population.

And given this shortage and the difficulties to hire, companies are thinking twice before laying off their employees, as they did at other times when demand began to fall.

The leisure and hospitality sector added 128,000 jobs in January, up from an average of 89,000 jobs per month in 2022. Throughout the month, food and beverage services added 99,000 jobs, while employment continued to decline. increase in accommodation (+15,000).

Leisure and hospitality employment remains below its pre-pandemic level in February 2020 at 495,000 jobs, or 2.9%, but seems to be regaining strength.

In January, employment in professional and business services increased by 82,000 jobs, led by gains in professional, scientific and technical services (+41,000).

Job growth in professional and business services averaged 63,000 jobs per month in 2022.

For its part, public employment increased by 74,000 positions in January.

Employment in state public education increased by 35,000 positions, reflecting the return of university workers after a strike.

In the United States, the labor market is mainly measured with two surveys: one for companies and the other for households.

The first is taken as the main reference for the job creation figure and the second is used to measure the active population and the unemployment rate.

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