Big US jobs rise in January surprises again

Big US jobs rise in January surprises again
A we're hiring signGetty Images

Job creation in the US surged in January, as the economy continued to defy predictions of a slowdown.

Employers added 353,000 jobs and average hourly pay jumped, while the unemployment rate held steady at 3.7%, the Labor Department said.

The report extended a streak of job gains that has surprised economists, who have expected a jump in interest rates since 2022 to slow the economy.

Analysts said the job market strength made an early rate cut less likely.

“The US employment data provided a shock, beating expectations by miles, with earnings much higher than expected as well,” said Neil Birrell from Premier Miton Investors.

“These numbers show the US economy to be strong and will sway anyone thinking a March rate cut was on the way to look further out. Any thoughts of recession are off the mark as well for now.”

The US central bank started raising rates two years ago, responding to price inflation that was rising at the fastest pace in decades.

Higher borrowing costs aimed to cool economic activity and ease pressures pushing up prices.

Price inflation has come down from the high rates seen in 2022, and stood at 3.4% in December.

But strong household spending, initially buoyed by pandemic-era savings, has kept businesses humming, generating a kind of virtuous cycle, as the healthy jobs market in turn sustains consumer spending.

The head of the US central bank, Jerome Powell, this week said officials were hopeful that inflation would continue to fall without a more serious downturn, but he said the bank wanted “greater confidence” before it declared victory and started to lower borrowing costs again.

He said a rate reduction in March, as some investors had been betting, was unlikely.

Health care and retail firms, as well as business and professional services, helped drive the January job gains.

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By David Ryckman